FX Weekly Insights — 01/11/21
Key Events
Monday
23:50 (JPN) BOJ Monetary Policy Meeting Minutes
Tuesday
03:30 (AU) RBA Interest Rate Decision 0.1% / 0.1%
03:30 (AU) RBA Rate Statement
05:50 (AU) RBA Debelle's speech
21:45 (AU) Unemployment Rate (Q3) 3.9% /4.0%
Wednesday
10:15 (EU) ECB's President Lagarde speech
12:15 (US) ADP Employment change (Oct) 400k/568k
18:00 (US) Fed Interest Rate Decision 0.25%/0.25%
18:30 (US) FOMC Press Conference
Thursday
12:00 (GB) BOE Interest Rate Decision 0.1%/0.1%
12:00 (GB) BOE MPC Vote Rate unchanged 6/9
12:00 (GB) BOE MPC Vote Rate hike 3/0
12:30 (GB) BOE's Governor Bailey speech
Friday
12:30 (US) Non Farm Payrolls (Oct) 425k/194k
12:30 (CAD) Net change in Employment (Oct) 19.3k/157.1k
Further Points:
-Previous sluggishness in jobs growth is not meant to stop the Fed tapering.
-BOE to give some signal on the pace of hikes.
- Will Australia abandon 'yield curve control' measures? Will the RBA slow down its purchases of government bonds? (currently running at A$4billion a week until mid- February 2022).
RUB on the Ground
RUB was under further pressure on Friday due to a technical correction. Outflows mostly from hedge funds and on MOEX it was better bid for the whole day with usual volumes. The arguments for this move to continue are as follows:
-the peak of tax payments and interim dividends payments.
-the rally in commodities (especially oil) would likely lead to the increasing of daily FX purchases by the CBR in November (announced Wednesday).
Technically the move in USD/RUB could reach 72.00/72.50.
Please note the public holidays in Russia this Thursday and Friday leading to less liquidity.
G20 Meeting in Rome: An Emphasis on Climate in preparation for COP26 in Glasgow
The G20, who collectively account for 80% of the world’s GDP and a similar percentage of CO2 emissions, have met in Rome this week. Their talks and negotiations are likely to set the tone for negotiations at COP26 in Glasgow next week. The emphasis has been largely put on climate, and how to implement solid policies and regulations to tackle greenhouse gas emissions and global warming. France’s President Emmanuel Macron and Italy’s PM Mario Draghi, are hoping for a breakthrough, regardless of the diverging views between developed and emerging countries, such as China and India who do not consider an exit from coal to be beneficial to their economies. Even though China has agreed to stop building coal stations abroad, its domestic economy is still heavily reliant on coal, fueling the nation’s grid amid an energy crisis. The commitments to be taken following the G20 meeting and COP26 concern reaching carbon neutrality by 2050, and to restrict global warming to 1.5 degrees, a more ambitious goal than the Paris Accords which set the goal at 2 degrees.
In terms of economic and fiscal policies, the G20 endorsed the reform on a minimum international tax on multinational companies. This reform was agreed upon in July by the G20 finance ministers. It is based on a 15% minimum tax on multinational corporations, in order to reallocate revenues to the countries where they operate, with Amazon, Facebook & Google as key targets.
Finally, the G20 has given member states the opportunity to conduct bilateral negotiations. Specifically, Macron and PM Boris Johnson have met on Sunday to discuss the tensions over fishing rights between France and the UK. Macron has also met with Biden, putting to rest the tensions following the submarine crisis. China and Russia are also pleading to have their Covid-19 recognised by member states, and Argentina is looking to renegotiate its debt repayment with the IMF, as it is going through a deep-rooted economic crisis and time is running out until it has to repay it next March.
Chart of the Week - EUR/USD
Resistance: 1.1700
Support: 1.1495