The G-10 rundown
USD – the US dollar is firm against risky currencies here, but weak against a hard-charging JPY, and even mulling a reversal against the euro. We await Trump’s response, but already his gambit to re-escalate the trade showdown with China dramatically accelerates the move toward direct US intervention in the exchange rates.
EUR – the euro rather neutral here – perhaps absorbing some support as a more liquid currency and due to position squaring in carry-land over this latest bout of volatility. Focusing on the 1.1150 area in EURUSD for signs that the new lows in that pair will not hold.
JPY – while most central banks around the world have geared up for a new easing cycle, the Bank of Japan has maintained a steady course and kept Japan’s yields largely stable, supporting the JPY, and now the currency is getting further support if carry trades into the riskiest high-yielders reverses. Given that Japan will feel hamstrung to do anything with its policy for fear of US reprisals, USDJPY could quickly head to 100.00 here with little resistance on the way.
GBP – sterling slowly grinding lower versus the euro, seeing little reactivity to the current environment as its weakening came prior to this latest bout of market volatility and the market is already positioned very short with no new developments to trade on.
CHF – the Swiss franc absorbing safe haven flows and EURCHF drive below 1.0900 – where is the SNB? The net apparent level is the last area of major stability in early 2017 around 1.0650.
AUD – the Aussie weak, but the move has not accelerated lower versus the US dollar despite the long-term support around 0.6828 breaking late last week. The RBA up tonight and could surprise with a rate cut, given the sudden escalation in the US-China trade policy showdown.
CAD – the Loonie enjoying relative stability here and USDCAD possibly one of the first places to look if Trump pulls out all of the stops to weaken the US dollar.
NZD – the kiwi in focus this weak over Q2 employment data up tonight and the RBNZ tomorrow night – maybe it’s time for Orr and company to impress with a larger than expected move – i.e. a 50 basis point cut?
SEK and NOK – the Scandies struggling in this environment and may continue to do so as pro-cyclical currencies. Watching the major highs in EURSEK (10.85) and EURNOK (10.00) to benchmark their weakness.
Upcoming Economic Calendar Highlights (all times GMT)
- 0715-0800 – Euro Zone Jul. Services PMI
- 0830 – UK Jul. Services PMI
- 1400 – US Jul. ISM Non-manufacturing
- 2245 – New Zealand Q2 Unemployment Rate / Employment Change
- 0130 – Australia RBA Cash Target Announcement
- 0300 – New Zealand Q3 Inflation Expectation