'Never-hike Draghi' slams the euro

The G-10 rundown

USD – It's important for broad USD sentiment that the EURUSD break lower hold. Elsewhere, USD strength is an easier prospect as less liquid DM and EM currencies are offered amidst weak risk sentiment. As for today’s US jobs report, in-line to strong numbers may be looked through, while exceptionally weak payrolls numbers and/or a disappointment on the earnings front could see notable USDJPY selling.

EUR – EURUSD poked to new lows and the question in coming days will be whether Trump’s tweets and anticipation of a further dovish shift at the March 20 Federal Open Market Committee meeting will prevent further progress lower. EUR weakness against JPY was even more pronounced yesterday – more to come there if risk sentiment deteriorates further.

JPY – the yen is the king of the mountain as the shift in risk sentiment sees the unwind of carry trades in EM/JPY et cetera. A deepening of this ugly backdrop could lead to at least an echo of the big JPY cross meltdown we saw at the beginning of the year.

GBP – sterling thriving against the euro, but what happens next week will be pivotal. We have been generally hopeful for sterling strength, but weak risk sentiment is not particularly helpful and if we don’t get a deal next week, a delay scenario could risk turning into a long delay scenario that leaves sterling twisting in the wind on the extension of uncertainty.

CHF – thriving on the weak risk sentiment and the ECB’s dovish turn – not much room for takeoff if the Swiss National Bank is going to defend the 1.1200 area.

AUD – the AUDUSD hanging in there above 0.7000, but for how long? Let’s see how the USD reacts over today’s jobs report, but the key test will be whatever emerges from US-China trade talks.

CAD – more upside range to work with in USDCAD and I expect the full extent of that range to be explored as long as we see this ugly backdrop. We will see an interesting test of this pair specifically today as both the US and Canada report their latest jobs numbers and Canada’s erratic employment change series is coming off a massive positive spike in January.

NZD – kiwi holding out against the US dollar in these market conditions is a near miracle and must be based on some combination of a hope that China will maintain its strong yuan policy and that something positive emerges from the US-China trade talks.

SEK – we were constructive on SEK rally potential but yesterday’s move shows that SEK is still highly sensitive to weak risk sentiment and the “low forever” ECB frustrates the idea that the Riksbank can ever really normalise. 10.729 was the post-GFC high in EURSEK and next Tuesday’s Sweden CPI is the next key event risk for SEK.

NOK – important risk events up for Norway early next week with Monday’s CPI and Tuesday’s Regions Survey. EURNOK resistance below 9.85 not holding this morning and a break and hold above risks setting in motion a bigger squeeze. Key two or three sessions dead ahead. 

Upcoming Economic Calendar Highlights (all times GMT)

13:15 – Canada Housing Starts
13:30 – Canada Feb. Unemployment Rate / Net Change in Employment
13:30 – US Feb. Housing Starts & Building Permits
13:30 – US Feb. Unemployment Rate
13:30 – US Feb. Change in Nonfarm Payrolls
13:30 – US Feb. Average Hourly Earnings
Saturday: Powell Speech, Q&A
Sunday: Powell interview on 60 minutes TV show