The G-10 rundown
USD – markets this morning seem hopeful that Powell will deliver a dovish shift today, though we won’t take the price action at face value and will await the FOMC verdict. Liquidity conditions could be terrible and the kneejerk reaction extreme on the headline of the hike/no hike decision and before the market has a chance to digest the statement and accompanying materials, much less Powell’s press conference. A very cautious stance warranted.
EUR – another new low in short BTP yields as Italy and the EU move toward a deal on the budget for this cycle. EURUSD just needs FOMC relief now and a risk on response to that relief to jump .
JPY – if the issue at the heart of weak risk sentiment is USD liquidity, then the traditional safe haven response in the JPY will likely prove rather weak in USDJPY terms if Powell can’t bring relief to global markets in whatever message he delivers today. And if a dovish shift powers strong risk sentiment, the USDJPY pair may offer low beta to a weaker USD as the market prefers riskier currencies.
GBP – strategic sterling positions are likely locked and loaded in the options market as we await developments hinting at the odds of a second referendum, a delay of the Brexit delay or new elections on a failure of May’s government after the mid-January vote on the ill-fated deal she agreed with the EU.
CHF – we appear on the cusp of a full resolution for next year’s Italian budget, helping EURCHF back higher. Swis National Bank up tomorrow.
AUD – we have strong concerns for Australia’s housing market triggering the first Australian recession in a generation, but for now, AUD only a bit weak in the crosses. Regulators easing up on mortgage lending standards
on interest only mortgages looks like rank desperation.
CAD – the oil plunge is doing the Loonie no favours and it is one of the few currencies managing to match the greenback’s weakness overnight.
NZD – we are sceptical on whether the kiwi can manage its relative strength in the crosses here – let’s see how the Q3 GDP numbers come in tonight.
SEK – EURSEK is squeezing back towards resistance on the fear that the Riksbank doesn’t hike tomorrow, frustrating the attempted break lower.
NOK – another runaway crude oil sell-off on top of the cessation of Norges Bank NOK purchases powered an ugly extension in NOK lower. This could get worse before it gets better if oil markets don’t quickly stop the bleeding.
Upcoming Economic Calendar Highlights (all times GMT)
0930 – UK Nov. CPI
1500 – US Nov. Existing Home Sales
1530 – US Weekly DoE Crude Oil, Product Inventories
1900 – US FOMC Meeting
1930 – US Fed Chairman Powell Presser
2145 – New Zealand Q3 GDP, Nov. Trade Balance
0030 – Australia Nov. Employment Data
n/a – Bank of Japan Meeting