EU focus: the first round of floating the idea of coronabonds was firmly rejected by a number of countries around the crisis summit last week, most vocally by the Netherlands’ leader Mark Rutte. But two of the four parties in the government coalition in the Netherlands have come out strongly against his stance and in favour of the bonds to support southern Europe’s struggle. This is an encouraging signal, but Germany-Italy spreads are above 200 basis points this morning: to avoid existential pressure from rising further, the EU needs to attack this crisis with full solidarity and some form of mutualization, whatever the approach, and the clock is ticking loudly.
The G-10 rundown
USD – the killer dollar rises again as risk sentiment sours and despite the Fed’s latest effort – likely only to peak once the crisis in confidence peaks for the cycle – as was the case in March of 2009. Watching ADP payrolls data later - there are so very many jobs in the US services sector that have been heavily impacted by the Covid19 crisis.
EUR – Germany-Italy spreads creeping wider – we need to get better solidarity signals from EU on how the periphery will fund its enormous fiscal needs and fast – next chance the April 7 meeting and the periphery pushing back hard today on using the ESM as opposed to mutual debt. Test of lows risk in EURUSD without stronger signals from EU leaders.
JPY – the yen trying to do its job as safe haven overnight, but showing signs of playing second fiddle versus the killer US dollar we get deeper into the European hours today. Still, note EURJPY downside pressure as a possible theme
GBP – sterling outperforming the EUR, but fading against the strong US dollar. Not sure what to do with the currency tactically, though like it for long term versus the euro – and may outperform commodity dollars further.
CHF – doesn’t look tradable for now as upside pressure contained by increasingly large efforts from SNB to intervene. Longer term question in back of mind: will the end of CHF upside pressure come in the event a domestic housing bubble unwind is set in motion?
AUD – the 0.6200 area saw the air getting thin for AUDUSD – looking for test of lows on global growth outlook and domestic credit crunch in housing.
CAD – as we outline above, there are many ways to dislike the loonie – looking for test of 1.4500 in USDCAD to start, possibly to shift well in excess of 1.5000 eventually before all of this is done.
NZD – the killer USD to be felt in NZDUSD downside if weak conditions prevail for this excessively strong currency. Looking for a retest of lows.
SEK – the Swedish krona hanging in there, perhaps to a degree on quarter end effects yesterday – but backdrop not supportive for SEK if we are tilting back into risk off. Technically eyeing 10.80-11.00 zone for direction.
NOK – EURNOK 11.50 still hanging in there as of this morning – watching the oil prices a year forward for a better indication on NOK prospects than spot – which can go literally anywhere. Fiscal stimulus supportive at the margin as it requires NOK purchases.
Upcoming Economic Calendar Highlights (all times GMT)
- 1215 – US Mar. ADP Employment Change
- 1345 – US Mar. Markit Manufacturing PMI
- 1400 – US Mar. ISM Manufacturing Survey
- 1430 – US Weekly DoE Crude Oil and Product Inventories