The G-10 rundown
USD – the US dollar coming out on top as geopolitical risk disrupts the “easy Fed” narrative and goes against the recent intensification of USD selling. So far, however, the upside has been rather modest, so USD bulls have much to prove.
EUR – the Euro negatively impacted by the situation – perhaps especially via EURJPY flows and EURUSD must stabilise quickly here around 1.1150 or so to avoid the impression that we are reverting to range-bound purgatory once again.
JPY – no surprise to see the JPY suddenly performing its role as the main proxy for risk-on and risk-off here as both bonds rally, driving lower yields and stocks sell-off, reversing recent drivers for a weaker JPY.
GBP – sterling a bit weaker on the change of focus as safe haven seeking at odds with recent popular long sterling trades like GBPUSD and possibly GBPJPY. 1.3000 is an important technical and psychological level for cable.
CHF – the franc is absorbing safe haven flows and the SNB is likely leaning against the price action here now that EURCHF is pushing on the cycle lows this morning.
AUD – the Aussie suffering on some consolidation after the run-up into year-end and especially on the sudden narrative shift that tears the focus away from celebrating the US-China trade deal likely set to be signed later this month. The AUDUSD rally remains intact if the pair steers clear from closing below the 0.6925-00 area.
CAD – the loonie celebrating the big boost in oil prices – particularly as demand for Canadian crude could accelerate if the risk of supply shocks is concentrated in the Middle East. A big technical break here as 1.3000 has fallen in USDCAD as well – the first break of that level since 2018.
NZD – the kiwi not liking the sudden change of focus away from the US-China trade deal and hopes for a global rebound. The NZDUSD rally is so extended that it will take tremendous further downside (far below 0.6600 to start) to demoralize the bulls.
SEK – the krona not taking a liking to relatively weak EU PMI’s yesterday, but more so the sudden risk-off tone and concerns for global growth that come with geopolitical risk-driven higher oil prices. NOKSEK perhaps a bit of a theme on oil prices as well, but SEK bulls in business in EURSEK as long as we remain below 10.60-ish.
NOK – the NOK absorbing inflows as oil prices spike, though with risk appetite negatively impacted, the reaction is muted. Couldn’t be better timing for Norway as the country’s largest new oil field in a long time has come on line in recent months.
Upcoming Economic Calendar Highlights (all times GMT)
- 0930 – UK Dec. Construction PMI
- 0930 – UK Nov. Mortgage Approvals
- 1300 – Germany Dec. Flash CPI
- 1500 – US Dec. ISM Manufacturing Survey
- 1900 – US FOMC Minutes
- 0145 – China Dec. Caixin Services PMI