Drivers for the Week Ahead

  • The dollar has stabilized but weakness is likely to resume
  • Treasury Secretary Mnuchin is trying to revive stalled stimulus talks; President-elect Biden will reportedly name his first cabinet picks Tuesday; FOMC minutes will be released Wednesday; it’s a quiet week in the US due to the Thanksgiving holiday
  • Brexit talks continue this week; eurozone reports some key data this week; ECB publishes the account of the October 29 meeting Thursday
  • UK preliminary November PMI readings will be reported Monday; UK Chancellor Sunak will lay out his fiscal plans for next year Wednesday; Riksbank meets Thursday and is expected to keep policy unchanged; Japan has a pretty quiet week Continue reading “Drivers for the Week Ahead”

“Benefits Cliff” Warns of Downside US Risks

The US faces a “benefits cliff” at year-end. With the economy already suffering from widening lockdowns across the country, the Q4 outlook is bad and the year-end expiration of emergency unemployment programs suggests Q1 may be even worse. All the more reason to pass another fiscal stimulus package, and possibly see increased Fed action. Continue reading ““Benefits Cliff” Warns of Downside US Risks”

Globe with black background

Roadblocks and Opportunities for International Trade in 2021

We see significant upside risk for global trade coming from “top down” forces (such as politics), but at the same time we expect the undercurrent reconfiguring many of the existing relationships to intensify. The “Peak Globalization” narrative (at least regarding … Continue reading Roadblocks and Opportunities for International Trade in 2021

Drivers for the Week Ahead

  • The virus numbers in the US show no signs of slowing; the dollar should continue to soften
  • October retail sales Tuesday will be the US data highlight for the week; Fed manufacturing surveys for November will start to roll out; the Senate will hold a procedural vote this week to advance Judy Shelton’s nomination to the Fed Board of Governors
  • Canada has an important data week; Brexit talks will (hopefully) wind up soon; UK reports key data
  • Japan and Australia have busy data weeks Continue reading “Drivers for the Week Ahead”

Drivers for the Week Ahead

  • US virus numbers continue to rise; for now, the weak dollar trend remains intact
  • The election uncertainty has cleared up, at least partially; two Georgia Senate seats go to a runoff January 5; the Georgia races are key given their implications for the Blue Wave
  • We think chances of a stimulus package during the lame duck session are low; October inflation data will be the highlight for the US
  • Brexit talks continue in London this week; UK has a heavy data week; eurozone has a limited data week
  • Japan has a heavy data week; RBNZ meets Wednesday and is expected to keep rates steady at 0.25% Continue reading “Drivers for the Week Ahead”

FOMC Preview

The two-day FOMC meeting starts tomorrow and wraps up Thursday afternoon. While no policy changes are expected, we highlight what the Fed may or may not do. We expect a dovish hold, with Powell underscoring the growing downside risks facing the US economy in Q4. While we are confident about our call for this meeting, the medium-term outlook will remain highly uncertain until we get a firm result from the US elections and a better grasp of how the pandemic will impact the economy. Continue reading “FOMC Preview”

What Are Markets Telling Us?

The reflation trade appears to be still alive and well as the US goes to the polls.  Global equities are up, bond prices are down, and the dollar is weaker.  What are markets telling us?  It appears that markets are pricing in solid odds of a Blue Wave today, implying significant fiscal stimulus and debt issuance in 2021.  Because of the perceived risks of another surprise victory by President Trump, we do not think the Blue Wave is fully priced in and so there is room for further movement if Biden does indeed win.  That said, “there’s many a slip twixt the cup and the lip” and so these directional bets can quickly reverse.  Markets should not be lulled into a sense of complacency and should instead be prepared for greater volatility across all markets over the coming days. Continue reading “What Are Markets Telling Us?”

Reflation Trade Back in Play as America Votes

  • The reflation trade is still alive and well as the US goes to the polls; the dollar rally failed at top end of recent trading ranges
  • Election day is today in the US; September factory orders and October auto sales will be reported; Brazil central bank minutes will be released
  • Sterling is recovering even as the economic outlook darkens; National Bank of Poland meeting was postponed two days until Friday ; Turkey reported October CPI
  • RBA cut both the cash rate and the 3-year yield target 15 bp to 0.10% but unexpectedly announced additional QE; Malaysia kept rates steady at 1.75%, as expected Continue reading “Reflation Trade Back in Play as America Votes”