background image background image background image

USD strength spotty, sterling bounces yet again

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The USD continues to press higher, although mostly against European currencies, as USDCNY remains stuck in the mud while we wait for Xi and Trump to meet at the end of the month. China appears to be extending an olive branch even as the US maintains a stern stance on trade issues.

On top of Friday’s broadside from White House trade adviser Navarro, who railed against large banks’ “shuttle diplomacy” and attempts to lobby the administration on a trade deal, yesterday saw the Wall Street Journal publishing an article (note: paywall) on the US widening its efforts to thwart Chinese intellectual property theft. This further spooked markets, especially in the US tech sector, where the chief focus of IP theft accusation lies. At the same time, China is mounting a significant campaign of sending all of the right messages on opening up ahead of the Trump-Xi summit at the end of the month.  

The pattern of USD strength versus other currencies suggests a real yield focus – as US real rates (the yield on treasuries versus inflation) have gone clearly positive while they are punishingly negative in Europe and Sweden (with incoming hikes and very cheap currency helping a bit there), and quite negative in the UK and Switzerland and even Japan.

Until either the Fed changes course or other central banks show a firmer commitment to tightening policy, the US dollar may have a hard time falling. Late yesterday, the San Francisco Fed’s Daly (filling the spot recently vacated by David Williams, who has moved to the NY Fed) was out speaking in favour of a December rate hike and possibly two more in 2019 as the Fed’s job is to bring down the overheating US economy for a soft landing. This may have boosted the US dollar, though rate expectations were steady.

In other news, NOK is even weaker than the very weak euro on another anaemic GDP print for Q3, with EURNOK toying with the 200-day moving average – we still prefer NOK to the single currency unless oil prices maintain their current rate of decline (surely too steep?). Sterling is back on the bid against the euro as the EU’s Barnier made positive comments and as negotiators were working through the night to put together a deal.

The hope is still that an agreement can be reached by Wednesday to allow the scheduling of a late-November Brexit summit. As we have pointed out, however, the issue is whether the UK Parliament will sign on. Surely any deal would have to see the UK payment into the EU tapered sharply after next year as part of a deal since the UK will lose its vote? Important UK data on tap today as an input for the last Bank of England meeting or the year on December 20.


USDJPY is back on the rise as risk appetite likewise bounces back. Japan’s negative real yields contrast with the positive real yields available in the US, which may be a key driver here for the US dollar and leave the JPY out in the cold. Only very weak risk appetite, most likely also requiring a simultaneous fall in sovereign bond yields can seem to offer the yen any support (unless the Bank of Japan performs an about face, something that would likely require significant pressure from global bond market developments). With risk appetite bouncing back overnight and bonds offered in early Europe, the yen shows how quickly it can weaken again. 
The G10 rundown

USD – real rates could be the chief focus here, keeping the USD bid as long as US yields continue to outpace especially the most negative real rate currencies where policy has no prospect of improving the real rate spread. Next US data point in the spotlight is tomorrow’s US October CPI print.

EUR – Germany’s ZEW survey today may remind us that the EU economic outlook remains weak and Italian recession concerns are building since banks are struggling and not looking to increase lending. Troubled Italian lender Banca Carige is the latest focus.

JPY – the speed with which the yen rolls back over to weakness again overnight suggests more sensitivity to global bond yields more than to risk appetite.

GBP – the EU may have as much as an incentive as the UK these days to hammer out a Brexit deal, as the rise of populism across Europe, the Italian budget issue at the December EU summit and May EU Parliamentary elections. But can May get sufficiently generous terms to ram the deal through parliament?

CHF – EURCHF breakdown risk still there as we challenge the 1.1350 area, but USDCHF looking the opposite way, having cleared the local range and now focusing on the 1.0300+ multi-year highs.

AUD – AUD maintaining more altitude versus the USD than many other G10 currencies likely due to the USDCNY floor remaining in place.

CAD – the USDCAD uptrend increasingly credible and focusing now on the highs of the range just ahead of 1.3400 for next steps.

NZD – the kiwi is making further progress in AUDNZD terms and may go for a full pull to the 1.0500 range support if the huge trendline stretching back to 2015 (four points on the line!) coming in around 1.0600 doesn’t provide support.

SEK – the focus on real rates notwithstanding, at least the Riksbank will be hiking rates soon and SEK remains too cheap versus the euro – high time for some follow through lower in EURSEK after the recent break below 10.30.

NOK – with the ongoing slide in oil prices, NOKSEK developing as a theme as 1.0700 comes under pressure here and EURNOK poking around at the 200-day moving average above 9.55 – an important resistance level. 

Upcoming Economic Calendar Highlights (all times GMT)

0930 – UK Oct. Jobless Claims Change
0930 – UK Sep. Average Weekly 
0930 – UK Sep. Employment Change / Unemployment Rate
1000 – Germany Nov. ZEW Survey
1300 – Norway Norges Bank’s Nicolaisen to speak
1500 – US Fed’s Kashkari (non-voter) to speak

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.