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Mark McCormick, North American Head of FX Strategy at TD Securities, suggest that after brief hiatus, the trade war theme is back to start a new week as reports noted a possible 10% tariff rate on $200bln in Chinese imports, which is a bit of an upside surprise as markets mulled the idea of a 25% rate.

Key Quotes

“Still, most global equity benchmarks are in the red to start the week, though USDCNH should remain the bellwether.”

“Central banks will also feature high on the event calendar this week. The Norges Bank looks set to hike, though an indication of a steeper path from here could maintain upside momentum in NOK. We still like downside in CADNOK en route to the 200dma near 6.26.”

“We don’t expect much from the SNB but any leans towards dovish could cement topside in CHF. Long EUR, AUD, and GBP against CHF look attractive on a tactical basis.”

“The focus in Japan centers on the US trade talks, the LDP election, and the BoJ. We like selling towards 113, as trade discussions will focus on the current account surplus where USDJPY still shows extreme overvaluation.”

“Trade tensions between the US and Japan also handicap the BoJ. Finally, a possible set of CA data this week favors reloading on USDCAD longs.”

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