The G-10 rundown
USD – the greenback has firmed, but has not yet broken back higher and we’re quite far from levels that suggest it may in EURUSD (1.1700), while AUDUSD is a bit closer to triggering potential downside levels into 0.7250-25. The “profligate US spending” narrative helping to drive real yields ever lower is being held back by political dysfunction in the US that could extend well past the election.
EUR – an important ECB meeting coming up that tells us whether the market has given up believing that the central bank can move the needle with its existing tool set – innovation will be required and mostly on the fiscal side (as well as recapitalization of EU banks) to dig the EU out of its hole.
JPY – as noted above, the JPY sits, together with the USD to a degree, as the flipside of the reflationary narrative and could come alive on broader evidence that this narrative is being challenged, to some degree already evident in the firming of safe haven bonds in recent days.
GBP – Bloomberg flags the important fact that Chancellor Sunak will be looking to unwind some of the UK’s emergency pandemic relief measures, starting with the restaurant subsidy this week and continuing with ending some eviction restrictions on September 20. The government has signaled it wants to stick to the timetable for other programs, with the fate of the furlough program supposedly set to end Oct 31 the most critical on that account. Oh, and then there is Brexit, where progress by the mid-Oct EU summit is imperative if we’re to avoid a nail-biter into the end of the year. The recent sterling rally has run out of steam and 1.3250 needs to hold in GBPUSD to keep the focus higher.
CHF – EURCHF is dipping back below 1.0800 and becoming a non-factor again – watching reactivity around ECB next week for whether the franc merits much attention.
AUD – we continue to watch the 0.7250-25 area technically for AUD and note that it’s remarkable how well the AUD has performed given its slower approach to opening up its economy – the reflationary narrative and select commodity prices have helped a great deal on that note and are the driving factor for AUD, with risk sentiment as a secondary factor unless the two move more forcefully in unison.
CAD – a busy week next week for Canada and USDCAD a favourite for potential further consolidation back toward USD strength tactically after the major 1.3000 objective was realized this week. The loonie strength must be showing up to a degree on the BoC’s radar, oil prices have weakened significantly and
SEK – the EURSEK price action bottled up in sideways range as SEK doesn’t appreciate risk sentiment weakness. The Riksbank governor Ingves has been out jawboning and suggested similar to the Fed that it would not worry about inflation overshoot (supposedly SEK bearish if inflation was a concern here, which it isn’t) but also noted that SEK developments have not been a concern over the past half year (SEK supportive). SEK needs more optimism and a breakout in the major European indices to run higher.
NOK – correction in risk sentiment and the lowest oil prices in about a month yesterday driving a sharp reversal in EURNOK back higher that is particularly disappointing after new lows since March were posted. If oil runs lower still on double-dip concerns, the pair could work back toward 10.75-80.
Upcoming Economic Calendar Highlights (all times GMT)
- 0925 – ECB's Villeroy to Speak
- 1230 – US Aug. Change in Nonfarm Payrolls
- 1230 – US Aug. Unemployment Rate
- 1230 – US Aug. Average Hourly Earnings
- 1230 – Canada Aug. Net Change in Employment / Unemployment Rate
- 1400 – Canada Aug. Ivey PMI