The G-10 rundown
USD – the US dollar is relatively inert as it has only fallen more materially against the hardest charging Scandies within the G10 and against EM currencies after the US-China trade deal was announced as the world goes gaga in reaching for yield and risk. We look for a weaker USD in 2020 but the path to that end looks very murky in the near term, and if the 2020 election appears a close call all year, this could make for a treacherous year ahead for USD traders.
EUR – the euro not able to find a pulse as we await the ECB’s policy overhaul outcomes and for the slow-moving EU to come up with its plans for fiscal stimulus. A major boost to the single currency would be an ECB decision to abandon negative rates and choose fiscal (climate policy – already well flagged), in part covered by ECB buying and perhaps new EUR climate bonds. Risks of a trade spat with the US are high.
JPY – the yen interesting here as it perks up despite the backdrop, perhaps to a degree on the more generous fiscal outlays in the coming year. We noted yesterday that this year has seen the most compressed volatility in the USDJPY pair in modern history stretching back decades – something has to give in the New Year?
GBP – sterling reaching a major support level in GBPUSD by retreating to 1.3000 – is there really enough uncertainty at the moment to drive it notably through that level? Perhaps, with 1.2800 the next level, but suspect that hedgers and optimist may be getting active soon on the long side.
CHF – the franc continues to surprise with relative strength in a world that can’t take on enough risk.
AUD – the Aussie has been a real disappointment in the wake of the US-China trade deal, assuming it stays on the rails here. To get AUD in a more secular rally stance in 2020, a further strong revival in Australia’s key commodity exports like iron ore and coking coal are likely necessary, but we wonder, in the longer term, how Australia squares its climate policy with the CO2-emitting underpinnings of its economy.
CAD – USDCAD is setting its own modern record in low volatility, with the smallest trading range of the last 24 years in 2019 and the current price is the mid-point of the three-year range. Risks are heavy for the Canadian economy and CAD if the market’s rosy expectations on the outlook for the US and globally prove too optimistic.
NZD – the kiwi edging to the upper end of its valuation potential versus the AUD, but we don’t have any catalysts in view to take the AUDNZD pair out of the range for the moment.
SEK – most of our thoughts on SEK above – EURSEK looks a bit stalled higher and may not make a statement until the New Year gets underway.
NOK – the NOK on the move here and potentially out of the gates in the first days and week or two of 2020 on the end of the well-known seasonality factor, where we discover if there is more fuel in the tank below 10.00 in EURNOK.
Economic Calendar Highlights (all times GMT)
- 0830 – Sweden Nov. Retail Sales
- 0900 – Norway Dec. Unemployment Rate
- 1330 – Canada Oct. Retail Sales
- 1330 – Canada Nov. New Housing Price Index
- 1330 – US final Q3 GDP revision
- 1500 – US Nov. PCE Inflation
- 1500 – US Final Dec. University of Michigan Sentiment
- 1600 – US Dec. Kansas City Fed Survey