The G10 rundown
USD – little safe haven flows on these latest trade talk worries, but would still expect USD to outperform smaller currencies if risk turns south after tomorrow.
EUR – positioning favours a resilient EUR through tomorrow in the crosses, but not necessarily within the G3 – EURJPY at new lows this morning.
JPY – the market’s current go-to for safe haven seeking – have to imagine that short-terrm potential is considerable if markets go haywire, but there is nothing to like about the currency in a durable sense as the Bank of Japan and finance ministry will be quick to respond to volatility.
GBP – sterling still on the defensive despite some signs of support for May’s position from her party, but waiting for Godot – I mean, for firm Brexit developments – has been futile.
CHF – we have noted that CHF not functioning as a safe haven currency, even as Italian spreads have blown back a bit wider again. CHF could be set for sharp weakening if risk appetite improves.
AUD – the G10 currency most at risk over the US-China trade talk outcomes.
CAD – USDCAD looks like it wants to head higher on risk sentiment deterioration, but tomorrow’s trade talks are the decider.
NZD – AUD perhaps seen as higher beta than NZD to China outlook, so the kiwi may get an undeserved partial free pass if general market volatility picks up.
SEK – New SEK lows since the global financial crisis versus EUR and versus the USD since 2002. A brighter outlook needed to throw the SEK a lifeline – and/or fiscal stimulus. Politicians will respond soon to this…
NOK – the action to key off Norges Bank – downside risks prevail regardless, however, on a risk-unfriendly outcome to the US-China trade talks. Big issues afoot in oil markets here as well. Upcoming Economic Calendar Highlights (all times GMT)
0800 - Norway Deposit Rates
1230 - US Fed Chair Powell to speak
1230 - Canada Mar. Intl. Merchandise Trade
1230 - US Mar. Trade Balance
1230 - US Apr. PPI
1230 - US Weekly Initial Jobless Claims
1430 - US Weekly Natural Gas Storage
1715 - US Fed's Evans (Voter) to speak
0130 - Australia RBA Statement on Monetary Policy
Key US-China bilateral talks begin