The G-10 rundown
USD – I outlined the last remaining hurdles for the year for USD bears in my Wednesday update. One of those receding at the moment is the long yield in the US, which declined yesterday on a strong 30-year T-bond auction result. The stimulus question and FOMC meeting and general risk appetite remain open questions. On a side note – the sidewise USDCNY is a bit of a concern for the USD bearish position as well.
EUR – the ECB delivered what was expected yesterday at its meeting, announcing a EUR 500 billion expansion of its QE programme and extending the horizon of purchases to March of 2022. More generous terms on TLTRO bank lending were also announced, including an extension of 12 months for the current favourable terms and new emergency LTRO’s to be offered next year as a liquidity backstop. Somewhat oddly, President Lagarde said that not all of the EUR 500 billion for QE need be used if conditions improve sufficiently, which some might see as hawkish. Elsewhere, it appears she tried to talk down the euro a bit with a comment that the ECB is watching the exchange rate closely.
JPY – the yen standing by in the wings to passively absorb strength on any sudden shift to the downside in risk sentiment – whether driven by hard Brexit concerns or otherwise.
CHF - the uptick in Brexit concerns seeing an uptick in CHF as a hedge against both GBP and EUR weakness. Assume that the SNB will robustly defend 1.0700 in EURCHF, after sight deposits have actually dropped over the past three weeks.
AUD – the AUD strength clearly driven by an incredible ramp in Chinese iron ore futures – have a hard time believing this can continue in the nearest term.
CAD – technically, the path to 1.2500 and lower has been opened in USDCAD – just having a hard time ginning up enthusiasm here if oil price momentum fades and risk sentiment takes a breather – some risk of consolidation, in which case 1.3000 is the major chart resistance.
NZD – still we like AUDNZD from a value angle since 1.0500 even if iron ore cools and the 200-day moving average at 1.0650+ holds back the pair in the shortest term.
SEK – assuming a solid recovery next year, we like EURSEK lower, but would prefer to pick spots, wary that a squeeze is possible above 10.30 in the near term if we finally see a more notable consolidation in risk appetite.
NOK – the momentum has come out of the NOK despite the Brent price north of 50 – need a proper follow through higher for ex-US risk sentiment and crude prices for a more notable NOK rally – still like NOK for 2021 eventually, however.
Upcoming Economic Calendar Highlights (all times GMT)
- 1330 – US Nov. PPI
- 1500 – US Dec. Preliminary University of Michigan Sentiment