The G10 rundown
USD – right or wrong, US tariffs not seen as a major risk for the US dollar, though the market feels uneasy on what to do with the greenback in this environment – sell on risk that Fed turns cautious due to trade wars or buy due to the risk of a global squeeze on offshore USD from the tight Fed and Trump tax reforms?
EUR – EURUSD stuck in neutral here – need some reason to believe that the European outlook is turning more positive to get liftoff above 1.1750-1.1800. The recent bullish reversal back above 1.1500, meanwhile, begins to get stale if we don’t see that follow up move higher soon and especially if we plunge back below 1.1500.
JPY – JPY upside showing up again on risk aversion, though the market looks a bit fickle and nervous and trade war headlines can drive the action either way, with strong risk of developments over the weekend from Trump tweets and China’s response.
GBP – sterling traders' nerves are getting frazzled by the back-and-forth headlines – not sure we can add anything productive for the tactical outlook as the next headline will drive the action, though there is still a strong binary risk in either direction depending on Brexit developments.
CHF – While support for the Italian government appears very high, the Italian yield spreads have eased back sharply lower, providing little further pressure on the EU existential front, leaving us scratching our heads a bit at the new lows in EURCHF.
AUD – The Aussie can’t catch a break and poked to new lows for the cycle in today’s trade. Housing market concerns are rising on the latest reports that Australian banks are tightening lending standards. If the US-China trade spat deepens, it only adds to the risk.
CAD – USDCAD eased back lower after its late rally ahead of today’s US and Canadian jobs data for August. Yield spreads are mid-range, so it will take data surprises and/or drama in energy markets to shift the story out of recent ranges, though the recent rally appears so far to be a rather firm rejection of downside risk.
NZD – outperforming the struggling Aussie and gets more focus if the 1.0800-50 area can’t hold, though we struggle to find reasons for sustained upside, given King Dove Adrian Orr is in charge at the RBNZ.
NOK – the krone remarkably weak as thinly traded currencies are out of favour and there is no real resistance ahead of the massive 10.00 level.
SEK – EURSEK bouncing back despite the relatively hawkish Riksbank statement, which has Swedish 2-year rates neat the high for the cycle as the bank indicates it will hike in December or February and that it is reasonable to hike by 25 basis points rather than in smaller increments. Rather than the Riksbank, it is the election this weekend and the risk of a strong showing from the Sweden Democrats has the market on edge. Click here for Saxo Bank Chief Investment Officer's Steen Jakobsen’s thoughts
on the election.