The G-10 rundown
USD – the greenback has continue to grind stronger – clearly negatively correlated with tactical risk-on, risk-off behavior in USD/EM pairs – but also within most of the G10 outside of USDJPY. Don’t see any pronounced risks of dovishness from today’s Fed as discussed above, but market not looking for much from this meeting, making a hawkish surprise easier even if unlikely.
EUR – the euro looks weak here, without prospects for immediate fiscal stimulus, with still weak activity levels, and with risks from the coronavirus outbreak from reduced Chinese demand for exports. Not sure how 1.1000 hangs on in EURUSD unless FOMC somehow weakens USD.
JPY – the JPY looks firm relative to the sell-off in safe haven bonds, perhaps as the coronavirus focus a bit more intense in Asia and therefore keeping traders more defensive there. Still like EURJPY lower if we don’t rip to new all time highs in equities and continue to see markets on the defensive
GBP – the GBPUSD chart has been triangulating for weeks and needs to break one way or another – risk is to the downside in the nearest term on USD strength and risk from positioning – but two-way risk over the BoE tomorrow.
CHF – the resurgence in risk appetite sees EURCHF pulling back above 1.0700 – more safe haven seeking needed for new lows, it seems, despite the SNB apparently stepping away from intervention – note the important sub 1.0650 lows from back in 2017 as well.
AUD – market largely brushing off the slight beat on headline CPI overnight as heavy commodity prices and coronavirus fears still weighing on AUD. Watching the 0.6700 area on daily closes post-FOMC and post next Tuesday’s RBA (next cut surprisingly only fully priced beyond May meeting) in AUDUSD for further downside risk as the pair hasn’t closed south off that level since 2009.
CAD – USDCAD consolidates a bit lower in sympathy with risk appetite and crude oil bounce, though the recent rally has neutralized the prior down move – GDP for November up tomorrow at the same time as US Q4 GDP.
NZD – the AUDNZD pair trying to stabilize a bit after new lows for the cycle failed to . Australia seen as more sensitive than NZ in exposure to China, so this pair may continue to struggle in undervalued territory as long as coronavirus fears impact key commodity prices.
SEK – EURSEK entering 9.60-65 swing zone – status of the pair heavily linked to whether risk appetite stabilizes here (if not – squeeze danger higher). Sweden Confidence surveys mixed, with consumers less happy than manufacturers, who saw a huge bounce in January from multi-year lows. Household lending remains pegged near the lows of the cycle.
NOK – EURNOK reversing from an important area above 10.10 yesterday as NOK seems rather reactive to sentiment shifts, even if oil hasn’t seen much of a bounce – no sigh of relief for NOK bulls until we are well back below 10.00 and have put coronavirus fears behind us – too early to make that call.
Today’s Economic Calendar Highlights (all times GMT)
- 1330 – US Dec. Advance Trade Goods Balance
- 1530 – US DoE Weekly Crude Oil Inventories
- 1900 – US FOMC Meeting
- 1930 – US Fed Chair Powell Press Conference