The G-10 rundown
USD – a small bounce in the US dollar’s fortunes yesterday as Brexit failed to bring the full-on breakthrough hoped for and perhaps simply on lack of further catalysts or flow to drive it lower after the recent move of reasonable magnitude. Not sure where the market looking for a catalysts, but recent inter-market correlations suggest risk appetite is negatively correlated with the US dollar.
EUR – little anticipation around the ECB tomorrow, as the warring factions aren’t in agreement on policy. It is clear that the ECB has reached the end of its policy rope – interesting to hear how Draghi treats his final press conference.
JPY – the yen getting a boost from the support in the bond market yesterday as the US 10-year benchmark yield approaching important resistance ahead of 2.00%. A further shift lower in yields and risk appetite needed for the yen to thrive – USDJPY needs to tilt one way or another as we discuss above.
GBP – plenty of room for tactical consolidation. Widely circulated chart yesterday that I retweeted showing collapsing tax revenues, a classic indicator of a steeply slowing economy. The Brexit delay doesn’t help and tremendous momentum will need to develop once the Brexit is in place to counter massive built-in damage that is likely here and for the next couple of quarters, according to credit impulse measures.
CHF – EURCHF sidelined by lower yields and lack of further Brexit process. The catalyst may need to come from fiscal stimulus in the EU if this pair is to blast out of the range to the upside.
AUD – the AUDUSD rally needing to take out the sub-0.6900 range highs to suggest a break higher is unfolding, though the 200-day moving average has also been a key resistance indicator this year, currently around 0.6965.
CAD – weak retail sales out of Canada yesterday, with the core at -0.2% month-on-month in September, but there was little impact on Canadian rates. The
NZD – while we await a pulse in AUDNZD, the NZDUSD chart has reached up into the critical resistance zone if the pair is going to remain in a bear market, with a local pivot (the September high) at 0.6450, the major early 2019 lows just below 0.6500.
SEK – Riksbank meeting tomorrow not seen as a major catalyst, with some risk that the recent runup in Swedish short rates is not supported by Riksbank guidance – EURSEK looking pivotal here, as it never quite made the knockout blow to the downside.
NOK – Recent new highs for the cycle as Norges Bank set to meet tomorrow – can they avoid talking FX in the statement and linking it to rate guidance after flattening guidance at the previous meeting?