The G-10 rundown
USD – the USD is turning lower is our new strategic conviction – the difficulty in the near term being the risk of back-filling – first we like it lower versus JPY, EUR and then GBP, eventually elsewhere, but possibly too early.
EUR – the ECB will go bigger than we think tomorrow and we will need to see the follow-up from EU politicians for the market to gain some confidence in their efforts. They will prevent a replay of the sovereign debt crisis for now – but the key to watch is not just the ECB’s efforts here, but the longer term willingness of the EU core to allow fiscal expansion across all of the EU.
JPY – the JPY is lower as bond markets have corrected violently after their parabolic ascent. Still see an eventual move to at least 100.00 in USDJPY.
GBP – sterling stabilizes quickly after the surprise cut as the additional BoE measures are the right medicine to bolster UK confidence. GBPUSD closing back above 1.3000 would be a start for a technical comeback.
CHF – the franc trades like a non-entity in these markets – curious how the market continues to trade the franc as the country’s economic base and therefore current account surplus are at risk of a major impact from the current activity shutdown.
AUD – the talk of the town is QE, but fiscal is the more important signal Down Under and will soon be on its way. Still, it is too early to call a bottom on the risk that the market has yet to absorb the possible scale of the hit to the global growth outlook this year from the coronavirus.
CAD – Further upside risk in USDCAD if oil prices stay low as this will heavily impact Canada’s too oil-dependent economy. The private leverage problem in Canada has to produce a credit crunch that will compound the negative risks for Canada’s outlook.
NZD – AUDNZD pushing to major lows - long term value with no short term technical reason to buy.
SEK – EURSEK is one to watch as the EU transitions to fiscal stimulus and Sweden will have to follow suit – a more bold Swedish fiscal move is needed to jolt the SEK out of its . In favour of cautious long term exposure to downside options strategy – but only perhaps 30% of a full position.
NOK – unwilling to call a bottom in the oil market and therefore in NOK for now on the further risk from the price war together with the rolling demand shock.
Upcoming Economic Calendar Highlights (all times GMT)
- 0930 – UK Jan. Manufacturing Production
- 1230 – US Feb. CPI