Brexit and US inflation in focus this week

The G-10 rundown

USD – the powerful erosion of US rate spreads on the Fed’s dovish pivot has done little to damage US dollar strength. Next test for the greenback arrives with this Wednesday’s CPI data for March.

EUR – the EURUSD supermajor heavy on the 1.1200 area after finding little bounce last week. Brexit must be weighing to a degree here in terms of willingness to trade the currency. Three-month implied volatility in EURUSD punching to new lows for the cycle and, at 5.28% as of this writing, is almost within half a percent of the all-time low from 2014 of 4.76%.

JPY – JPY crosses turned back lower with US yields on Friday – likely the dominant focus here for the  yen. Thee “meltup scenario” would likely drive yen weakness, while renewed concern on the global growth outlook and lower long yields would drive a yen snapback – AUDJPY the high beta pair for trading these forces.

GBP – the nervous range continues as it’s not at all clear this week will produce anything decisive – short dated sterling volatility trading near 1-month lows.

CHF – EURCHF remains relatively heavy in the 1.1200 area – mildly surprised that recent strong risk sentiment hasn’t driven a more notable rally – there hasn’t been particularly strong evidence of a Brexit uncertainty premium. 

AUD – riding high versus the struggling kiwi, but pulled in two directions by supportive commodity and China developments on the positive side and concerns that the RBA is set to cut to ease the pain of the housing bubble unwind.

CAD – USDCAD coiling around without conviction as we await developments from here. The risk appetite and energy market backdrop has been about as supportive as possible, but Bank of Canada expectations have failed to track this as the housing slowdown and weak growth are holding the currency back.

NZD – it appears AUDNZD has turned the corner, as we discuss above, and the shift in the Reserve Bank of New Zealand guidance to a cutting bias could keep the kiwi on its backfoot for the medium term.

SEK – the krona needs indication of an improvement in the European growth outlook to push down through the 10.35-40 area in EURSEK.

NOK – the strong oil prices and Norwegian short rates up at their highest level since 2014 doing all they can to  support NOK, but EURNOK continues to languish in the range – can’t we at least get a test toward 9.50-40 here? 

Upcoming Economic Calendar Highlights (all times GMT)

1215 – Canada Mar. Housing Starts
1400 – US Feb. Factory Orders