All eyes on Asian FX as renminbi firms

The week ahead

Today:
US April ISM Services – this survey has been frustratingly erratic, but still worth watching the employment sub-index for any counterpoint to the strong US jobs report Friday as well as the overall level of the headline index after March’s steep decline to 50.8. Some of that was driven by the March employment sub-index cratering to 46.2 from 53.9 in February.

Wednesday:
FOMC: Looking for minimal drama from the FOMC this week, with expectations at nil for a rate cut at this meeting and the June expectations sharply lowered after the strong jobs report. June is only in play if we get clear labor market data weakening before that meeting - Fed will see itself as data dependent with so little clarity on how the trade deals will shape up. Trump can’t help himself in further criticizing Fed Chair Powell as a “total stiff” and calling for rate cuts, though he reiterated he has no plans to fire Powell.

Thursday:
Norway’s Norges Bank and Sweden’s Riksbank. Gathering clouds for the Norwegian economy on the weak oil prices, but Norges Bank may keep cautious on lowering the rate outlook if it wants to keep NOK from fresh weakness. EURSEK has found new equilibrium around 11.00 with Riksbank not likely to add anything new to the equation as their rate cut cycle may be done (at the margin, some pricing of one last reduction to get the policy rate to an even 2.0%).

Bank of England. It’s time for another rate cut from the Bank of England, which the market has fully priced in. Guidance will be pivotal here as the June BoE meeting is priced about 50-50 for a further cut. (Also critical for sterling is the direction of risk sentiment – sterling got pummeled on the risk-off downdraft into Liberation Day and will likely remain sensitive to any fresh ugly market volatility bouts.)

US Weekly Initial Jobless claims – the high frequency labor market indicator that needs to flash red if we are headed into recession in the US. Last week’s spike was interesting, but apparently chiefly driven by a one-off spike in New York schoolteachers, who can oddly file for benefits during the Easter break.

Friday:
Canada’s April employment numbers. While CAD has strengthened back below 1.4000 in USDCAD, there is little for the Canadian economy to celebrate as the economy looks set to enter a recession. The jobs data never moves in a straight line, but could remind the market that Canada is not in a good place.

FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.

The CNH momentum shift is the most notable development here – will this persist? AUD clearly picking up some interest (note 2-day and 5-day positive momentum shifts) from the firmer CNH and the key AUDUSD rate is trying at new multi-month highs in the Asian session.

Table: NEW FX Board Trend Scoreboard for individual pairs.
Note the highlighted AUD pairs are set to switch to AUD-uptrends today if the AUD strength holds – driven clearly by the CNH firmness. Elsewhere, I am having a hard time getting behind the JPY crosses that have switched into uptrends – let’s see how these shape up in the coming couple of sessions.