The G-10 rundown
USD – the US dollar on its back foot nearly across the board safe for versus the CHF (see above) and the more sentiment- and safe-haven-yield-sensitive JPY. The quality of a sentiment shift like yesterday’s is difficult to hang one’s hat on – we’ll use the 3000 level in the S&P 500 as our global risk barometer pivot level and as a coincident indicator for USD direction (with further improvement in hopes for a recovery driving a weaker USD.)
EUR – the positive surprise from the Merkel-Macron deal reverberating strongly for now – with the next focus on the EURUSD level of 1.1000, while EURCHF remains perhaps a purer expression of further easing of EU existential concerns.
JPY – the Bank of Japan has announced an extraordinary meeting this Friday to discuss the lending programme ordered by the Abe government as government and central bank move in increasingly obvious coordination. The JPY didn’t react much to this announcement and continues to trade as a safe haven currency, i.e., the latest backdrop providing maximum weakening pressure at the moment.
GBP – sterling getting caught in the cross-fire. On the one-hand, hopes for a more promising post-Covid19 recovery are positive and helping to lift sterling versus safe haven currencies here, but on the other hand, more BoE talk of negative rate consideration (the latest from the BoE’s Tenreyro yesterday), concerns on funding UK current account imbalances, and the risk that post-Brexit transition period terms of trade with the EU will as the latter shows signs of more solidarity are negatives.
CHF – EURCHF lifting sharply off the recent range lows on signs of EU solidarity in the. A reversal of speculative bets and safe haven into CHF could see EURCHF lifting higher still for a time. First major resistance up into the 1.0800 area.
AUD – China moved ahead with tariffs of 80% against imports of Australian barley, a move seen in retaliation for Australia’s questioning of the origins of the coronavirus even if China claimed the move was against Australian dumping of barley hurting its domestic production. The AUD was slightly lower in the crosses, but still managed a strong day yesterday against safe-haven currencies. China is said to be considering move against Australia’s wine and dairy industries. Watching that AUDUSD range high at 0.6570 and then the next levels up toward 0.6675.
CAD – a massive run higher in oil prices and strong risk sentiment boost CAD once again versus safe haven currencies – the 1.3850 area range low is key in USDCAD, but no technical reversal structurally until the pair trades all the way down throught 1.3500.
NZD – the key bearish factor for the NZD is its clear intent to transition to a negative rate policy and its long term accumulated current account deficit. But getting a small leg up here against the Aussie on the risk to Australia’s exports from Chinese tariffs. Structurally bullish AUDNZD even if a significant short-term setback unfolds here.
SEK – good news for EU solidarity is good news for SEK, as EURSEK poked at the recent lows and has confirmed the 200-day moving average below 10.70 as the important resistance for now. The next zone of interest down into 10.50-40.
NOK – no drama today from Norges Bank’s Olsen, who suggested that the global monetary tool box is not empty. Little need for urgency from Olsen and company at the moment after the Norwegian government announced a huge stimulus package and with oil prices lifting significantly. EURNOK a bit sluggish – next major focus area all the way down at the 200-day moving average, which is rising toward 10.40 at the moment.
Upcoming Economic Calendar Highlights (all times GMT)
- 1230 – US Apr. Housing Starts and Building Permits
- 1400 – ECB’s Lane to Speak
- 1400 – US Fed Chair Powell and US Treasury Secretary Mnuchin to testify
- 1400 – US Fed’s Kashkari (Voter) to Speak
- 0130 – China PBOC policy rate announcement