* All eyes and ears were on ECB president Draghi's address in Lindau this morning, but there was nothing on policy guidance or exchange rates, and as such, we have seen the EUR strengthening as this event risk passes.
* The lack of inflationary pressures will only be exacerbated by this continuous bid tone in the single unit, which has now extended to fresh highs vs GBP as we now approach 0.9200. EUR/USD is eyeing 1.1800 again, and EUR/CHF is back above 1.1400.
* Whether this will continue is not in question, but more so where this continuation will occur. Against the USD, we see clear resistance above the 1.1800 level, but vs GBP and CHF, further upside looks likely in the near term, and EUR/JPY is pushing back to 129.00 again despite USD/JPY fragility.
In the background, the manufacturing PMIs in France and Germany are all better than expected, pushing the EU wide index up from 56.6 to 57.4, when a slight moderation was forecast.
* USD/CHF remains in the upper 0.9600's for now, so there is less of an emphasis on USD softness today, underlining our view that EUR bulls may have to focus their attention away from the spot rate in the near term.
* We see the USD still trying to recoup some ground this morning, but we are getting little change out of the mid 109.00's. Thin markets are still playing their part, with notable offers see here despite the softer risk tone.
* Notable in some of the comments from president Trump in Arizona overnight were those which took a more concilliatary tone over North Korea. Comments on NAFTA were a little more familiar in tone - impulsive - in suggesting the accord will be terminated at some point, but this had implications for CAD/JPY and MZN/JPY to a larger degree - the former back under 87.00.
* The US 10yr Note is still around 2.20%, so on this basis, the near term consolidation in the lower half of the 109.00's is warranted. Levels on the upper side to consider should yields pick lie at 110.00 and 111.00, but we will need a defined catalysit for this and Jackson Hole offers the next opportunity.
* Strong gains on Wall St last night as both the S&P 500 and Dow closed near to 1.0% up, the NASDAQ 1.35%. More modest gains seen in the Nikkei at circa +0.25%.
* Front and centre this morning are the comments from president Trump overnight that the NAFTA accord will be terminated at some point. Not quite sure what the rationale was for this, but CAD has softened alongside the MXN as a result. The USD is also pushing up a little this morning, so 1.2600 being tested at present.
* Strong demand seen ahead of 1.2500 last night, and even though the core retail sales in Canada was strong yesterday, the numbers were for Jun, and headline sales missed consensus at 0.1%. Can this be sustained in the longer term? We'll see. We still maintain rate pricing for the near term looks a little strong, and despite the longer term prospects for CAD appreciation, we cannot rule out a deeper correction, coinciding with the broader USD moves.
* Oil prices are also looking on the heavy side, and traders still see WTI vulnerable above $45.0, with the US shale production having only temporarily faded into the background. $50.0 and above looks a tough ask, and this will weigh on CAD, especially if we dip under $45.0.
* Immediate USD/CAD resistance either side of 1.2600 is holding fast for now, but through here we look set to test 1.2700, though 1.2750-1.2800 proved strong as we anticipated.
* Focus was on NZ last night, with the budget surplus forecasts still on the healthy side, but downward revisions for 2018/9. However, it was the downgrade to GDP for 2017/8 which has hit the NZD, marking it down from 3.7% to 3.5%, which seems arbitrary given comparative levels across the developed economies.
*That said, the NZD has enjoyed some strong concurrent gains with the rest of its major counterparts, and the differentiation is now starting to kick in, so the above is more a catalyst, rather than outright reason to start selling.
* Given the market is starting to look for avenues to express some USD recovery, NZD will look attractive, with the recent run of data (employment stats weak in Q2) also set to weigh.
* AUD/NZD is now through the recent limits seen in the mid 1.0800;s, and also 1.0900, and we now look to the psychological 1.1000 mark as the next obvious target. NZD/USD is now set to push under 0.7200, sub 0.7100 the next major area of support.
* We also see AUD/USD back under 0.7900 again, but losses look to be a little reluctant, and following the general USD moves were are seeing across the board.
* Nothing can relieve the pressure on the Pound at the moment, and we are seeing traders crowding in again on the sell mode which has throttled the Cable rate above 1.2900 despite bouts of near term weakness in the greenback.
* All the pressure is coming through the relentless bid tone in EUR/GBP, which is now pushing into the key 0.9200-50 zone. We believe this area will prove significant over the week or so, but a break through here would see us concede a quicker move to 0.9500!
* UK talks with the EU are clearly at an impasse, and the concessions are there for PM May to make. Europe is united and will take its stand, so for all the talk of soft and hard Brexit in previous months, it is finally clarified that this distinction carried little water, with recent GBP gains significantly retraced.
* Cable support here seen in the 1.2750-1.2800 area, but the pressure is unrelenting this morning. In familiar fashion, traders are targeting the weakest link, and that is GBP at present.
* Newsworthy are accusations at PM May that the latest Brexit papers leaving open the possibility of ECJ influence on UK law is an effective U turn. This would be seen as 'soft' Brexit a few months back, but we see little positive impact on GBP this morning!
* Commodities had a very quiet session, last night we saw some action in spot WTI after the API draw down came in line with expectations. Yesterday copper broke the $3.00 handle but has since come back under, there is a support level at 2.9350 to keep an eye on. Gold and silver are both trading higher but marginally so and lastly keep an eye on vanilla prices as they shot through the roof yesterday, this could effect some of the food producers.