Dollar Firms as Risk-Off Sentiment Boosted by Weak Global Data

  • Global equity markets are back under pressure as global growth concerns mount
  • Eurozone preliminary December PMIs were very weak; the ECB and Draghi delivered a rather dovish hold
  • China reported weak November retail sales and IP
  • US November retail sales will be the data highlight today
  • Japan’s Q4 Tankan report was mixed
  • Russia central bank unexpectedly hiked rates 25 bp to 7.75% 

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Dollar Soft Ahead of ECB Decision

  • Sentiment has been boosted by some positive signs trickling out of China
  • Despite all the drama, Prime Minister May survived the Tory leadership challenge
  • The ECB meets; SNB and Norges Bank kept rates steady, as expected
  • Italian Prime Minister Conte said the budget deficit would be targeted at -2.04% of GDP next year
  • Philippine and Turkish central banks kept rates steady, as expected; so did Brazil last night

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Sterling Firms Ahead of Tory Confidence Vote

  • UK Prime Minster May faces a no confidence motion in her leadership of the Tory party
  • Huawei CFO Meng was released on bail in Canada
  • The meeting yesterday between President Trump and Democratic Congressional leaders Schumer and Pelosi did not go well
  • Considering Macron’s volte-face, we ran updated budget and debt numbers for France and the results aren’t pretty
  • US November CPI will be reported today; Sweden November headline CPI rose 2.0% y/y
  • South Africa November CPI rose 5.2% y/y; India reports November CPI and October IP; Brazil COPOM is expected to keep rates steady at 6.5%

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Dollar Consolidates as Markets Stabilize

  • News that top US and Chinese trade officials spoke by phone is helping to boost market sentiment
  • UK Prime Minister May called off the Parliamentary vote originally planned for today
  • Odds of a no-deal Brexit are rising; UK reported stronger than expected labor market data today
  • Add France to the list of fiscally irresponsible eurozone countries
  • US rates have stabilized, at least for now; focus turns to the upcoming US inflation readings
  • Turkey reported a record October current account surplus of $2.77 bln; South Africa October manufacturing production rose 3.0% y/y

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Drivers for the Week Ahead

  • Global equity markets remain under pressure this week as risk-off sentiment continues to impact global markets
  • Markets continue to reprice Fed tightening potential; we do not think there is a Powell Put
  • The focus now turns to US inflation and retail sales readings this week
  • China is speaking out against the arrest of Huawei’s CFO Meng Wanzhou; trade data for November came in much weaker than expected
  • UK parliament is scheduled to hold its Brexit vote Tuesday
  • The ECB and Norges Bank meet Thursday; the central banks of Turkey, Brazil, and Peru meet this week

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Dollar Firm, Markets Calm Ahead of US Jobs

  • The US yield curve continues to flatten
  • Fed tightening expectations are still falling
  • The November US jobs report is the data highlight of the week
  • Market sentiment is so negative right now that one data point can’t turn the tide
  • Eurozone final Q3 GDP growth came in lower than expected at 1.6% y/y
  • Press reports suggest UK Prime Minister May is considering a delay to the Brexit vote
  • OPEC talks continue
  • Brazil IPCA consumer inflation is expected at 4.17% y/y; Mexico November CPI is expected to rise 4.6% y/y

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Dollar Firm as US-China Developments Feed Risk-Off Sentiment

  • US bond and equity markets reopen today amidst a backdrop of risk-off sentiment
  • US-China relations are likely to remain on edge after the arrest of Huawei’s CFO Meng in Canada
  • Because of yesterday’s holiday, the ADP report was delayed until today; yesterday’s Beige Book gave a balanced view of the economy
  • Prime Minister May’s government is contemplating concessions to win over Brexit rebels
  • Oil is coming under severe pressure again after Saudi officials highlighted difficulties in agreeing to a significant output cut
  • Canada reports October trade and November Ivey PMI; Australia reported trade and retail sales
  • EM is coming under renewed pressure despite lower US rates; South Africa reported Q3 current account data

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Dollar Hangs on to Gains as Markets Stabilize

  • Markets are stabilizing as China attempted some damage control overnight
  • The 10-year yield broke decisively below 3% Monday and continued to move lower yesterday
  • Eurozone reported final services and composite PMIs for November
  • UK Prime Minister May lost three key votes in Parliament; the last UK PMI prints for the week were weak
  • Australian GDP data came in much weaker than expected; Philippines November CPI rose 6.0% y/y
  • Reserve Bank of India kept rates steady, as expected; National Bank of Poland is expected to keep rates steady at 1.5%

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From the Securities Lending Trading Desk

In the US, ROKU is trading at roughly three times their IPO price while ARLO is half of what it was in August. Shares in Japan’s largest messaging platform company soared last week after the Nikkei newspaper reported a tie-up with Chinese tech giant Tencent Holdings. In Europe, Viceroy Research rocks another South African firm with a new report citing accounting inconsistencies.

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