The G-10 rundown
USD – the market very sensitive to the next data releases – where the reaction function is most clear for the likes of USDJPY as we discuss above in the event the balance of the data this week surprise strongly in either direction.
EUR – the euro looking weak versus the JPY as well as EURJPY bears look ready to re-engage here for the balance of the month in the event the mood remains downbeat on the global economic outlook and yields continue to fall.
JPY – still keeping an eye on the sudden injection of volatility into the JGB market, but if yields generally falling elsewhere, likely to drive JPY weaker, though traders may be reluctant to commit beyond the next couple of weeks as we know the BoJ is gearing up for fresh policy moves at its October 31 meeting.
GBP – we know the outlines of what Boris Johnson will do today, but how will the EU side respond, and if the response is a categorical refusal to even negotiation the points of the deal, sterling could risk tactical downside.
CHF – EURCHF mimicking EURJPY yesterday, but not today – still get a sense that something fiscal this way comes in the EU eventually – upside optionality in EURCHF of interest over the three to six months horizon.
AUD – Notwithstanding RBA governor Lowe expressing hope that the Australian economy “appears to have reached a gentle turning point” (others might call it a dead cat bounce) AUDUSD is trading very heavily still as risk sentiment weighs and AUD at risk from ongoing fears of a global growth slowdown. And we have yet to hear more explicit discussion from the RBA on what happens once it reaches the effective zero bound on policy. Aussie 2-year government paper has plunged to new lows below 65 basis points this morning.
CAD – Canada’s PMI managed above 50, but we still hold the general opinion that the market is complacent on the BoC trajectory and risks to the Canadian economy and CAD on a growth slowdown. Technically, however, we need that rally and close north of 1.3300 in USDCAD to have evidence that the market is catching on.
NZD – the kiwi passive here and it takes heavy lifting to get the rate expectation spread below that for Australia, so we may risk more near term consolidation lower in AUDNZD:
SEK – EURSEK pointing higher and further weakness in risk sentiment on the global growth outlook could see the pair trading north of 10.85 and into 11.00+.
NOK – if risk sentiment and oil prices continue to weaken, EURNOK risks a trip north of 10.00 and could drive significantly above if reasonable separation is achieved as there is likely a consensus domestically – based on chart action as well – that this is some absolute barrier.
Upcoming Economic Calendar Highlights (all times GMT)
- 0830 – UK Sep. Construction PMI
- 1215 – US Sep. ADP Employment Change
- 1430 – US DoE Weekly Crude Oil and Product Inventories
- 1450 – US Fed’s Williams (Voter) to Speak
- 2230 – Australia Sep. Services Index
- 0130 – Australia Aug. Trade Balance