The G-10 rundown
USD – given last week’s strong earnings data (both the Average Hourly Earnings and Employment Cost Index data series), wouldn’t expect any change to the Fed’s hawkish stance. As for the midterms, an earthquake in favour of the Democrats is a bit tough to price, but could mean a weaker US dollar if the fear is that the Dems will launch an aggressive campaign to take down Trump.
EUR – 1.1450-1.1500 is the local resistance and pivot area for EURUSD – have a hard time seeing the Euro aggressively stronger in a rising US yields environment, unless an unlikely breakthrough materializes in Italy’s budget negotiations or China makes a more aggressive move to boost the renminbi.
JPY – rising yields the chief focus for the yen, and a strong headwind for the currency if the continue to rise. The USDJPY focus will be on the next hurdle – the big 114.50 range high that stretches back to early 2017.
GBP – the market maintaining a positive spin on Brexit, but we agree with noted money manager Steve Eisman, who suggests that the risk is the parliamentary vote more than whether the May government and the EU can cobble together an agreement. Eisman is betting on a hard Brexit
CHF – fading Italian core yield spreads and higher US yields pressuring the CHF and keeping USDCHF above parity at the moment, while EURCHF is a tough on to see above 1.1500 without some political breakthrough in Europe.
AUD – the Aussie saw a sharp squeeze last week triggered by crowded speculative shorts and China showing support for its currency. Not sure how much more fuel is in that move, but not at all convinced we have seen the lows for the cycle. Hard to see why the Reserve Bank of Australia changes its tune at its meeting tonight, given concerns that the Australian housing market bubble may finally be unwinding. As well, the latest Caixin Services PMI out of China was at a weak 50.8 versus 52.8 expected and 53.1 in September.
CAD – the loonie struggling a bit in relative terms on weak oil prices and the USDCAD is the opposite of a thing of beauty. Jobs data on Friday was uninspiring. The RBNZ up early Thursday, likely with little new to say.
NZD – playing keep-up with the Aussie at the moment as AUDNZD trades with the lowest volatility ever – is there a plan to peg the kiwi to the AUD at 1.0850 afoot (I'm joking, but there hasn’t been a reason to trade the kiwi in a long time).
SEK – the krona getting a bit more traction and looks ready to break the 200-day moving average and sub-10.30 lows this week if markets avoid any fresh meltdown in risk appetite or spike in EU existential woes (We are ambivalent on how the market trade the latter: as we have discussed – the primary concern for the krona on EU existential concerns has been on the implications for Sweden’s economy – but recall that in the past cycle peaking in 2012, the krona showed very different stripes as a safe haven from EU existential worries).
NOK – we still like a repricing of EURNOK lower, but NOK’s prospects not compelling at the moment as crude oil prices have collapsed on strong supply news and the US announcing waivers for eight nations purchasing Iranian crude. Upcoming Economic Calendar Highlights (all times GMT)
• 0930 – UK Oct. Services PMI
• 1325 – Canada Bank of Canada’s Poloz to Speak
• 1400 – US Oct. ISM Non-manufacturing
• 0330 – Australia RBA Cash Target