The G-10 rundown
USD – bad data will likely be bad for the USD, but likely only versus other highly liquid alternatives. An October 30 FOMC rate cut is already guaranteed, in our view, and risks ballooning to a 50 bp move if US equity markets suffer a very deep correction.
EUR – If EU rates have more or less reached absolute zero, the convergence of US rates lower together with the Fed riding to the rescue on balance sheet expansion may mean EUR is trying to find a bottom soon if not already.
JPY – the 107.00 area in USDJPY is an important one for triggering potential further downside, as the pair is one of the most sensitive to US data surprises.
GBP – the weak UK services PMI showing that UK recession is here and now and not sure that Brexit news flow stands much of a chance of brightening the outlook – especially if EU brusquely rejects Boris Johnson’s plan today, hoping to have a different counterparty in negotiations after a delay and a UK election.
CHF – very interesting divergence in normal behaviour to see EURCHF poking back higher even as risk sentiment and EURJPY head lower. We’ll file it under “interesting” for now – but perhaps the “absolute low in EU yields more or less reached” argument helps suggest similar for EURCHF and any whiff of promise on fiscal moves from the EU could boost the pair further. First step is retaking 1.1000.
AUD – the AUD has bounced a bit against a struggling greenback, but we don’t find the AUDUSD the most compelling option for a weaker USD if we see a continuation of the present risk-off move. AUD traders awaiting inputs from US-China trade talks.
CAD – the USDCAD technical outlook pointing higher after the smart reversal as CAD is too strong here if a US recession is incoming, oil prices remain low and lower, risk sentiment weak and the Bank of Canada rate outlook is lowered.
NZD – risk for NZD bears that AUDNZD has to explore a bit lower before finding a new base, though we still likely higher for the long haul.
SEK and NOK – weak risk sentiment and bad economic data are poisonous for these currencies and EURNOK risks a squeeze higher if it gains significant separation from 10.00 on a capitulation-like move. EURSEK is not far from its highest daily close for the cycle either.
Upcoming Economic Calendar Highlights (all times GMT)
- 1230 – US Fed’s Quarles (Voter) to Speak
- 1230 – US Weekly Initial Jobless Claims
- 1400 – US Sep. ISM Non-manufacturing
- 2235 – US Fed’s Clarida (Voter) to Speak
- 0130 – Australia Aug. Retail Sales
- 0130 – Australia RBA Financial Stability Review
- 0320 – Australia RBA’s Ellis to Speak