The G-10 rundown
USD – US yield picture a key driver – higher yields generally seen as supportive for the greenback, provided the US yield rises are outstripping global counterparts. Watching those US Treasury auctions late today and tomorrow.
EUR – the euro finding some relief on BTP yields being tamed yesterday, and there is two-way risk on headlines linked to the ongoing budget forming process and whether the EU will take the unprecedented step of rejecting the budget. The dark horse would be the market simply deciding that a 2.4% deficit for 2019 is manageable. 1.1500 is clearly a pivotal level for EURUSD here.
JPY – the JPY suffering from mixed signals as risk appetite recovered to a degree, but lower bond yields generally a JPY positive. USDJPY perched near the pivotal 113.00 area in USDJPY again.
GBP – sterling rallied further as the two sides in Brexit negotiations are working on an intricate solution to the Irish border problem, with the latest spin that the Irish “backstop” could be removed, keeping the whole of the UK in the customs union as a backstop until the deal is worked out beyond the Brexit date. The other details are too intricate to go into here (and very dry), but the price action speaks for itself and we could be heading toward an announcement of further progress as early as next Monday.
CHF – EURCHF bounces back slightly and GBPCHF in a ripping rally. Broader CHF weakness more likely if EU core yields rise without an ugly decline in risk appetite.
AUD – the recent new lows in AUDUSD below 0.7100 not holding at the moment and we have a very well established descending channel going back months where each new major low yields to extensive backfilling. These chart formations don’t last forever and if the USD doesn’t stay firm here, the AUDUSD is one of the USD pairs at highest risk of a short covering squeeze.
CAD – USDCAD avoiding 1.3000 for now as we await the next leg of action in the US treasury market. 1.3000 is the upside swing level in a very messy chart.
NZD – AUDNZD trying to get interesting into the pivotal 1.1000 area. Not sure of the catalyst, but before the last few days we have seen a rather ripping rally in Australian mining stocks over the last few months.
SEK – relief on the EU existential front could provide some relief for SEK, and SEK bulls will want EURSEK to stay below 10.50. Political gridlock providing negative headlines, but don’t see the transmission of this into the economy or Riksbank outlook. Sweden’s September CPI to be reported tomorrow.
NOK – CPI up this morning as we look for the throwback rally in EURNOK to fade soon if global equity markets and EU existential risks stabilize. Surely we have an indication either way before the weekend on whether NOKSEK can take this 1.1000 level? Upcoming Economic Calendar Highlights (all times GMT)
0600 – Norway CPI
0830 – UK Aug. Manufacturing Production
0830 – UK Aug. Visible Trade Balance
1230 – Canada Aug. Building Permits
1230 – US Sep. PPI
1530 – US Treasury Auction of 3-year notes
1615 – US Fed’s Evans (non Voter) to Speak
1700 – US Treasury Auction of 10-year notes
2200 – US Fed’s Bostic (Voter) to Speak