CNY strength tames the USD comeback attempt

The G10 rundown

USD – the big dollar was mounting a comeback late yesterday until CNY rose overnight, as wait to see whether China has committed to steer its currency even farther away from the 7.00 breaking point in USDCNY as a show of good faith while further negotiations on trade are underway. Further CNY strength will muddle the market’s ability to price USD elsewhere – especially if risk appetite remains wobbly.

EUR – the yellow vest movement in France difficult for the market to price so it isn’t pricing it all even if we feel it is a risk. Italian yields are benign here – but this isn’t euro supportive when European Central Bank policy expectations are nil and German bund yields are scraping bottom on a parlous growth outlook.

JPY – the yen finally getting a jolt as the drop in longer US yields has become more profound and is threatening pivotal levels (10-year benchmark and the 3.00% line in the sand – yesterday closed at ). A fresh dose of JPY volatility may return if the market risk appetite sours rather than rally into year-end, as the strong consensus seemed to expect in the immediate wake of the G20 meeting.

GBP – sterling drooping again as parliamentary opposition forces threaten to find May’s government in contempt for not revealing legal advice linked to the Brexit deal. EURGBP is trading at the high end of the range since late September.

AUD – the only development propping up the AUD in this environment is the CNY strength – but our outlook for the Australia economy is weak, major export commodity prices are weak and the large Australian mining stock. The only thing lacking is a technical reversal for AUD bears to get involved and the speculative short has been very slow to clear as well. Australia Q3 GDP up overnight in Asia.

CAD – the loonie can’t seem to get much going here and likely won’t unless oil prices and risk sentiment improve in tandem. And Alberta’s threat to cut oil production speaks volume on how little Canada has been able to leverage higher oil prices earlier this year as it can’t get its oil to market amidst a glut of US production.

NZD – AUDNZD testing the multi-touch rising trendline – could open up for the remainder of the multi-year range all the way below 1.0300 though we see nothing fundamental to drive such a move without further catalysts. But broad NZD strength beginning to look more than a touch overdone. Stay tuned.

SEK – EURSEK drops sharply after a strong manufacturing PMI yesterday – and this suddenly helps the downside case on fresh momentum – can the stubborn pair finally clear the 10.20 area and progress on toward 10.00?

NOK – no fresh spin here – watching Norges Bank’s regions survey today and NOKSEK for whether the downtrend is set to continue after a strong performance put in by SEK yesterday. Norway’s latest CPI and a Norges Bank meeting up next week.

Upcoming Economic Calendar Highlights (all times GMT)

0815 – Switzerland Nov. CPI
0900 – Norway Nov. Region Survey
0930 – South Africa Q3 GDP
1230 – Sweden Financial Stability Council Press Conference
1500 – US Fed’s Williams to speak
1600 – New Zealand Nov. QV House Prices
0030 – Australia Q3 GDP