Secular EUR bull is upon us. SEK in gangster mode.

Other bits and pieces
ECB – market underestimating the needed hawkish shift? The ECB is up later today. Despite the obvious sea change in forward guidance that is now necessary, the market repricing of the ECB has been fairly subdued, with only a 20-basis point reduction in expected cuts for this year. The ECB is seen cutting today, but should fully shift to neutral on the prospect for future cuts – with the market priced for another 40 basis points beyond today’s cut. But will they?

JPY – USDJPY back in focus?: The spike in European yields ripped the focus away from the Japanese yen rally over the last two days and saw EURJPY backing up sharply – a fair move given the shift in EU-Japan yield spreads. But looking at the JPY broadly, I am more convinced than ever that Japan would like to get USDJPY to 130 or lower eventually to avoid negative attention from the Trump administration on its currency level, but how does it engineer such a move outside of direct intervention? One way is through at least picking up the pace of BoJ hikes (even if we can’t expect long Japanese yields to match what is going on in Europe). Overnight, we get the news that Japanese workers are asking for a more than 6% wage increase this year in spring wage negotiations that wrap up at the end of this month, the most since 1993. (Remember there are fewer “Japanese workers” now as Japan’s labor force ranks are shrinking and set to crater in the years ahead due to demographics). How are we still only at one more rate hike (+29 basis points to be exact) in BoJ expectations through year-end? USDJPY is breaking down and looks set for a run to 140.00 at least – but on what time frame (a couple of weeks or a couple of months) if the EUR situation dominates? Watching 10-year JGB’s if they approach the 2.00% level eventually as well – this was the high ahead of the GFC and since the late 1990’s.

CAD: The Canadian dollar has rallied again even as the US tariffs on all Canadian imports went forward, showing that the market seems to have overplayed the implications of this policy tool. Still, the CAD rally has been halting as PM Trudeau insists that Canada will stand firm with its Canadian counter-tariffs even after Trump decided to punt the tariff on auto imports another 30 days. If Trump takes this personally and wants to punish Trudeau/Canada for not cowing to his agenda, some CAD risks remain.

SEK the new gangster currency among G-10. The EU fiscal expansion was always going to be SEK positive as the Swedish economy is leveraged to EU demand, but the move turned up to gangster-mode today on a hot Swedish inflation print this morning (ex Energy at +0.9 MoM and +3.0% YoY vs. 2.7% expected). EURSEK is down below the massive 11.00 level this morning and USDSEK is eyeing the huge 10.00 level soon if it continues to fall.

NEW 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.

An enormous trend shift higher in EUR in recent days, and note how the SEK is turning downright gangster as Sweden is seen as leveraged to EUR strength. NOK is having a deserved snap-back moment, one that could deepen if Norway wants to add its fiscal firepower to investing in Europe’s security umbrella. Elsewhere, the US dollar is under the most pressure of late in terms of negative trend shifts, while JPY has lost some focus on the blast higher in EU yields.

Table: NEW FX Board Trend Scoreboard for individual pairs.
AUDUSD and NZDUSD set to flip back to positive trend readings today if they don’t sell off again today. Note the incredible SEK readings, not only in EURSEK but in the crosses. This may be an overshoot in the near term, but more to come in the medium term from a valuation angle and note the 10.00 level in USDSEK heaving into view.