From the Citibank spot desk via our FXWW chatroom:
USD: Increased focus on needed revisions to FOMC policy guidance is driving USD appreciation amid a light data schedule. There should remain further room for USD gains as strength extends beyond the G3. Focus on Friday’s retail sales should begin to build. Leading indicators point to risk for strength, but market is already looking for solid 0.5% on core, Citi 0.4%. .
EUR: EUR likely to remain subdued following ECB amidst relatively light data week. Today we get French Aug CPI – market expects 0.5% down from 0.6% last month, but many, including Citi, expecting 0.4%. Being the August print, two weeks out from the September flash, the impact beyond the initial release seems unlikely to be pronounced.
GBP: GBP bouncing on more recent ‘No’ favorable poll. We see limited scope for much of a bounce heading into next week, with little value being short the tail should we see a ‘Yes’ vote. The next poll is expected around the weekend from Yougov, where markets will watch on the previous ‘Yes’ lead.
JPY: USDJPY likely to take direction from broader USD move. Tomorrow’s industrial production somewhat less of a focus being already the second look at July figures. BoJ speeches this week have largely towed the party line. Nevertheless, disappointing data is lowering the bar for further easing and we continue to see room for strength in USDJPY.
CAD: We retain a negative bias on CAD, but with little on the horizon domestically, currency likely to take direction from broader trend in USD,
AUD: Surge in part-time unemployment leading the pop higher overnight. Citi economists are downplaying the significance, consistent with market reaction. We see potential for extension of the AUDNZD rally.
NZD: Little in the RBNZ statement to add additional fuel to the dovish fire. As impact of RBNZ wanes, NZDUSD will look to broader USD trend for direction. RV in antipodeans could favor AUDNZD longs.
NOK and SEK: Swedish elections the overwhelming focus for Scandies, although Norwegian focus is reemerging. We’d weight Friday’s Regional Network Report over the CPI. NOK becoming sell on rallies, especially against USD with market reassessment of Fed and carry risks. Swedish CPI relevant this morning for year-end Riksbank pricing. We’d fade SEK weakness so long as core at or above 0.4%.
CHF: Overnight SNB comments likely not a specific signal on coming easing, but should add to speculation on potential Swiss response to ECB. Long USDCHF remains attractive.