Chief Macro Strategist
The market remains generally plagued by low volatility, though there is just enough going on to keep traders from falling asleep or turning off the screens and heading for the beach before autumn sets in.
Sterling: no fresh catalysts, but sterling trades persistently weaker, possibly as investors and businesses are bracing for the seemingly rising risks of a “no-deal Brexit” impact.
China trade data: trade data for July showed a much smaller than expected surplus of $28 billion (versus $38bn expected) but the shortfall was due to a massive growth in imports (rushing ahead of the tariff threat?) even as exports managed to grow slightly more than expected. In short, we’ll need a few more months of data from both the US and China to assess the real impact.
Trade wars: Trump administration announces tariffs on $16bn of Chinese imports to go into effect, though this is merely a completion and specification of the original $50bn in tariffs promised after the July 6 tariffs on $34bn went into effect. US equity markets are within hailing distance of all time highs (S&P 500) and the VIX is back below 11, suggesting widespread complacency.
US yields: a shade higher again after all orderly with the enormous $34bn three-year Treasury auction yesterday; more interesting is the 10-year auction today, but it’s hard to work up anticipation as the bond market seems to be absorbing these auctions well – still need to keep an eye on the 3.00%+ level in the 10-year benchmark.
Chart: AUDNZD
AUDNZD advanced well above 1.1000 yesterday before dialing back ambitions ahead of tonight’s RBNZ meeting and Governor Orr's press conference. We have been disappointed that NZD downside hasn’t been even more pronounced with the arrival of the dovish Orr and his introduction of two-way guidance. Tonight is a key test for this pair, with downside less likely to indicate support for NZD, but rather distaste for exposure to AUD – perhaps on concerns of its exposure to a struggling China, etc. if the pair does remain clear to the upside of 1.1000, the next focus is the 1.1250-1.1300 area that has capped the range since 2015.
The G-10 rundown
USD – the USD weakened a bit further overnight, but the move merely takes the currency back into the ranging swamp that so many USD pairs have become mired in over the summer.
EUR – a bit more strength overnight, driven by an easing existential worries linked to Italy (Finance Minister Tria out this morning sounding the right notes on fiscal rectitude, etc.) and possibly on EURGBP flows.
JPY – the yen firming a bit again this morning after going nowhere yesterday and needs to continue to firm to encourage the EURJPY bears who have been teased by a break of 129.00 area support that is currently in jeopardy. GBPJPY is working through the last shreds of its 2018 range…
GBP – new lows for 2018 versus the euro late yesterday and into today raise the temperature, but the bigger level in EURGBP is 0.9000. The last major Fibonacci of note in GBPUSD, meanwhile, comes in just below 1.2900. Below that and we look toward 1.2500 if the USD is broadly bid.
CHF – Italy’s BTP yields opening sharply lower this morning, letting the air out of the EU existential risk trade that is EURCHF.
AUD – AUDUSD is hopelessly stuck, awaiting developments to spark a view. Positioning and the nearby upside pivot zone suggests a squeeze risk higher, and a solid recent boost to iron ore prices are an additional positive. If China announces a new fiscal stimulus, the upside risk could pick up further.
CAD – a sharp rally in USDCAD firmly rejects the attempt down through the pivotal 1.3000 for now – not sure of the immediate catalyst, but a technical hook for bulls to get involved again here, with a close above 1.3100 further deepening the sense that the upside potential remains the focus.
NZD – AUDNZD pivotal around the 1.1000 level as we have discussed above, and NZDUSD close to a fresh downside break if the market can scare up a view on the USD.
SEK and NOK – SEK drifting weaker ahead of the uncertainty of September 6, if the move deepens, we might have a look at downside option spreads or the like as political uncertainty may not have much to do with the direction of the economy post-election. NOK is putting us to sleep and we await CPI data on Friday for both Sweden and Norway.
Upcoming Economic Calendar Highlights (all times GMT)
• 1230 – Canada Jun. Building Permits
• 1245 – US Fed’s Barkin (FOMC voter) to speak
• 1430 – US Weekly DoE Crude Oil/Product Inventories
• 1700 – US Treasury 10-year Auction
• 2100 – RBNZ Official Cash Rate
• 2200 – RBNZ’s Orr Press Conference
• 0130 – China Jul. CPI / PPI
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)