The G-10 and CNH rundown
USD – weaker on the Blue Wave Lite scenario driving more aggressive US fiscal and hence US external deficits. The more US long yields rise, however, the more resistance comes in unless the Fed steps in with fresh guidance. A 77.5 reading in the Dec. ISM Manufacturing prices paid enhances the interesting in coming inflation releases.
CNH – China moving against Hong Kong opposition overnight, seeming to make a number of strong moves during the lame duck period of the US political cycle. The onshore rate is flat relative to the move of two days ago – so we can see how USDCNH is always its own “market”.
EUR – the EURUSD pulling to new highs and could be set for a run to 1.2500+ - but new fiscal in Europe and something resembling good news on the economic growth front would be helpful at some point.
JPY – the yen is a bit more of a reluctant fellow traveler in strengthening versus the USD when long US yields rise – still, USDJPY managed its lowest daily close yesterday aside from one day during the pandemic crisis last spring. The next obvious chart area there is 100.00.
GBP – sterling is sidelined by the ugliness of Covid and the drag of Brexit uncertainty – with the latest move in EURGBP back into the higher range. The structural setup for the UK is so similar to that for the US, but with such a different starting level. The UK race to vaccinate relative to the extra contagious Covid-19 strain on the loose there is what to watch over the next two months.
AUD – the AUDUSD actually accelerating beyond its trend channel on this latest move, as AUD draws on support from the reflationary narrative, its exposure to rising iron ore and other commodity prices and a stronger Asian economy, with only the recent trade spat with China on Australia’s stance on a number of issues the lone sour note in the background. Oh, that and private debt levels – but that’s not where we are in the cycle.
CAD – the Saudi move to independently cut yesterday indicative of the resolve to get the supply/demand balance for oil back in place and the surge takes CAD higher, if more slowly than other commodity dollar peers. The next major USDCAD level looming into view soon as 1.2500 approaches.
NZD – the kiwi keeping pace with the AUD as AUDNZD has traded back and forth across the 200-day moving average for weeks now. Still see the chart as having put in a low as long as we stay north of perhaps 1.0600 and prefer AUD as long as the reflationary trade is on.
SEK – the krona enjoying a surge in strength here after a squeeze earlier this week and EURSEK should test 10.00 soon if we avoid a consolidation in risk sentiment and can see the light at the end of the Covid-19 tunnel in coming weeks.
NOK – the krone in a very good place with this latest surge in oil prices and EURNOK testing new post-pandemic wipeout lows – next area into 10.30, but really the huge 10.00 level eventually.
Upcoming Economic Calendar Highlights (all times GMT)
- 1300 – Germany Dec. CPI
- 1315 – US Dec. ADP Employment Change
- 1400 – UK BoE Governor Bailey to Speak
- 1445 – US Final Dec. Services PMI (Markit)
- 1500 – US Nov. Factory Orders
- 1530 – US Weekly DoE Crude Oil/Product Inventories
- 1900 – US FOMC Meeting Minutes
- 2350 – Japan Nov. Labor Cash Earnings
- 0030 – Australia Nov. Building Approvals
- 0030 – Australia Nov. Trade Balance