NY Open: Twenty pounds of headlines
Markets started the day in a confusion of incoming news as ECB chatter met with trade talk updates and US macro data. EURUSD took it on the chin and dropped from 1.1270 to 1.1235.
Head of FX Strategy
Summary: After yesterday’s ugly session on Wall Street, global FX has switched back to risk-on, risk-off mode, with the strong USD and JPY firming across the board and pushing back on the EM currency resilience of late.
The G-10 rundown
USD – the US dollar is firming on a safe-haven bid and we watch today’s close with trepidation. A close at new lows would be ominous for potentially chaotic markets early next week.
JPY – is keeping up with the greenback when risk-off behaviour intensifies.
EUR – the euro is weaker versus the USD, JPY and CHF on the fresh existential pain from Italy’s budget as the risk of downside picks up here. Headline risk is intensifying.
GBP – sterling is wilting again as despite the friendly noises from the EU on the prospects for an extended transition period for the entire UK through 2021, Tory rebels don’t like the idea of continuing to “pay without say” and may vote with the opposition to force a second referendum. Long-term options are the only way to keep a position through the ugly back and forth likely to mark the next two months of Brexit developments.
CHF – the EU existential risks are forcing EURCHF back lower, though that pair looks inferior to EURJPY for expressing euro risks.
AUD – AUD rally attempt is wilting, but feels dampened relative to risk-off behaviour, perhaps on crowded short positioning and China continuing to prop up the CNY above the floor.
CAD – USDCAD free of local resistance as oil weakness and risk off weigh – could look toward 1.3200 next if the break above 1.3050 holds. Watch out for Canada CPI and Retail Sales data later.
NZD – AUDNZD test higher rejected and could open for test lower below the 1.0850-00 pivot area.
SEK – SEK doesn’t like risk off and likes EU existential pain even less.
NOK – ditto SEK comments with the Brent crossing back below 80 a warning sign for NOK longs.
Upcoming Economic Calendar Highlights (all times GMT)
1230 – Canada Aug. Retail Sales
1230 – Canada Sep. CPI
1400 – US Sep. Existing Home Sales
1600 – US Fed’s Bostic (Voter) to speak on economic outlook