The G-10 rundown
USD – the US dollar is turning lower, a move encouraged by strong risk appetite on the sense, or hope, that the Fed is ready to provide the liquidity needed to avoid any reaggravation of USD shortage issues. The data calendar is light this week, but the news calendar may not be politically, also as Thursday will see a major policy speech from Vice President Pence on China.
EUR – the Euro rallying here, perhaps 25% supported by Brexit hopes and the rest down to the sense that the ECB has reached an absolute low here and that the only next policy step will be more FX-supportive fiscal stimulus.
JPY – the JPY not enjoying the ongoing weakness in bonds and strong risk sentiment, together with the sense that the BoJ is scratching around for more logs to throw onto the fire in bringing further easing at its policy meeting at the end of the meeting.
GBP – the market leaning rather hard on a Brexit deal getting done – earlier this morning I was thinking that an extension scenario means kneejerk “uncertainty”, but as sterling aggressively rallies this morning, I am wondering if a delay scenario could be even more GBP supportive as it could open up for a path to Remain or an even softer Brexit and that the worst possibly outcome is Boris’ deal or something even softer. We shall see soon enough.
CHF – Swiss franc surprisingly firm given euphoric sterling and weak bonds this morning. EURCHF having a hard time finding separation from 1.1000.
AUD – AUD enjoying the strong risk appetite and AUDUSD has cleared local resistance, though a bigger pivot level awaits just below 0.6900 and the 0.7000+ needed to really start turning the trend.
CAD – USDCAD has broken lower, but the bottled up range of the last many months extends all the way to just above the 1.3000 area, a level with significance well back into 2018.
NZD – yield spreads suggest AUDNZD should continue to find support, in the current area, but traders have to be frustrated with the lack of momentum for renewing the rally. We will likely need a catalyst to do so.
SEK – EURSEK dipping into the pivotal area below 10.80, but needs more enthusiasm in risk appetite, more EUR strength and more of a sense that the EU and Swedish economies have bottomed to really start pushing lower (SEK higher). The recent news that unemployment data is faulty could give the Riksbank pause this week in getting too pessimistic.
NOK – the krone trading to record lows. Many suggest seasonality is in part to blame as NOK tends to do poorly into year end, but weak oil – and importantly natural gas – prices are a driver as well. Norway’s export revenues from Natural Gas are beginning to take over those for oil.