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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Dollar Remains Under Pressure as US Rates Fall, Portion of Curve Inverts

  • The dollar remains under pressure as the drop in US rates picks up steam
  • An inverted US yield curve has been the market bogey-man this year
  • This yield compression comes despite surging oil prices and firm US data
  • BOE Governor Carney defended the bank’s Brexit analysis that was released last week
  • Reserve Bank of Australia left rates steady, as expected
  • The EM manufacturing PMIs for November have so far been eye-opening

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Drivers for the Week Ahead

  • Markets are breathing a sigh of relief after the G20 meeting
  • Russia and Saudi Arabia agreed to extend their plan to support the oil market into 2019
  • The Trump-Xi dinner yielded a 90-day truce
  • The November US jobs report Friday will be the data highlight of the week
  • There is a full slate of Fed speakers this week before the pre-FOMC press embargo goes into effect next week
  • Ahead of the December 11 UK parliamentary vote on May’s Brexit plan, the bill will be debated
  • Reserve Bank of Australia meets Tuesday and Bank of Canada meets Wednesday

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Dollar Claws Back Losses Ahead of Weekend and G20

  • The dollar continues to claw back some of this week’s losses ahead of the weekend
  • Yesterday, FOMC minutes did not really reveal much new but markets of course focused on the dovish aspects
  • The G20 meeting gets under way today in Buenos Aires; the most important meeting will be that of Trump and Xi.
  • Eurozone reported preliminary November CPI; Italy signaled some willingness to tighten its budget
  • China reported weak official November PMI
  • Japan reported a fair amount of data; The BOJ tweaked its bond-buying program slightly
  • Bank of Korea hiked rates 25 bp to 1.75%, as expected; Poland November CPI rose 1.2% y/y; India reports Q3 GDP

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Dollar Stabilizes in the Wake of Powell Comments

  • The dollar has stabilized after the initial sell-off in the wake of Powell’s speech
  • Markets might be reassessing the knee-jerk reaction to Powell
  • Fed messaging could use some work; FOMC minutes will be released today
  • Oil prices have slid to new lows for this move today
  • Germany reports preliminary November CPI today, followed by the eurozone reading Friday
  • Banco de Mexico releases its monetary policy minutes

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