Elsewhere, as discussed in this morning’s Saxo Market Call podcast, we note the general failing of the China recovery narrative, as commodity prices have faltered over the last month, the CNH continues to weaken broadly (not just versus the USD) and the Aussie is serving as a solid proxy on that front. It has rolled over aggressively versus the NZD, sparked this week by the combination of softer than expected AU wage data and a more hawkish than expected NZD, but the critical AUD pair in focus is AUDUSD, which is testing below the 200-day moving average again today. Besides general correlation with risk sentiment for that pair, also watching copper as a coincident indicator, with further broad AUD weakness a risk if the price punches well below $4/lb.
Broadly speaking, the USD is an expression of risk sentiment and the backdrop remains testy, with an overriding concern of escalating tensions between the US and China as Ukraine risks becoming a Cold War-style proxy war, as well as the technical situation in US equity markets, where the recent action has been poised on critical support levels (rising trend-line and 200-day moving average in the case of the S&P 500. The January PCE inflation data is up later today – watch the core month-on-month for directional surprises. Note that next week’s US data does NOT include the jobs data on Friday, which won’t be reported until the following Friday, March 10 (also the day of the next BoJ meeting, Kuroda’s swan song – should prove an interesting day for USDJPY.)
Table: FX Board of G10 and CNH trend evolution and strength.
Note the CNH relative weakness despite USD strength, note the AUD relative weakness. Signals are muted elsewhere, with relative SEK strength largely an artifact of the big move off the back of the Riksbank meeting now more than two weeks ago.