The G-10 rundown
USD – critical test of the market’s complacent assumptions around the Fed policy outlook on Wednesday and at any time this week on headlines linked to the US-China trade deal issue. The focus switches quickly to incoming economic data on Friday and beyond with the latest jobs and earnings numbers and ISM Manufacturing (next Tuesday’s ISM Non-manufacturing more important than the latter.)
EUR – Germany politics are a risk to the notion that we will see a straightforward path to fiscal stimulus and fiscal unity – the FT reminds us this morning that Brexit will already mean that Germany’s contribution to the EU budget will double next year. And in an election in the former East German state of Thuringia, 31% voted for the hard left Die Linke, with 23.4% voting for the anti-immigration AfD party, outpacing Merkel’s CFD at 21.8%
JPY – the Bank of Japan has nothing effective to reach for and may not come up with much in its policy review promised for this Thursday’s meeting, in the meantime, the backdrop Is about as JPY-unfriendly as possible, but we are increasingly contrarian on further JPY weakness from here – long JPY upside volatility one way to trade for a change of mood.
GBP – sterling sideways as we await clarification on the length of the Brexit extension, with the momentum in the news pointing to a Jan 31 extension as Macron may finally be giving way on this point. Labour is holding out on voting in favour of Dec 12 elections, claiming there must be an iron-clad guarantee to remove the risk of a No Deal Brexit.
CHF – the franc struggling near key EURCHF resistance with the backdrop about as supportive as possible for a rally, given widespread complacency and struggling safe haven bonds.
AUD – less enthusiasm for AUD than one would have thought on increased hopes for a US-China trade deal – and AUDUSD has yet to clear the 0.6900 area hurdle, much less the bigger level up into 0.6950-0.7000.
CAD – this Wednesday’s Bank of Canada an important signal for USDCAD on the degree to which the BoC is comfortable with maintaining the developed world’s highest policy rate. The 1.3000 level in USDCAD critical from here.
NZD – AUDNZD looks more buoyant again after surviving a test of support. Certainly, any further removal of concern on the outlook for China, for example from even a relatively narrow US-China trade deal, could provide more support for AUD than NZD.
SEK – the message from the Riksbank last week both hawkish (get back to zero) and dovish (stay there forever), so we need more support in the form of fiscal, an improvement in the global and EU economic outlook, etc. to get a more determined SEK rally and driver EURSEK down below 10.60.
NOK – the NOK weakness even more notable now as the backdrop could hardly be more supportive. Next test is likely over year end and whether seasonality is a key driver here.
Upcoming Economic Calendar Highlights (all times GMT)
- 1230 – US Sep. Advance Goods Trade Balance
- 1430 - US Dallas Fed Oct. Manufacturing Activity
- 1500 – ECB President Draghi to Speak