FX Weekly Insights — 15/11/21
Key Events
Sunday Consensus/Previous
23:50 (JPN) – GDP (QoQ) Q3 Flash -0.2%/0.5%
Monday
02:00 (CN) – Retail Sales 3.5%/ 4.4%
Tuesday
00:30 (AU) – RBA Meeting Minutes
02:30 (AU) – RBA Governor's Lowe speech
07:00 (UK) – ILO Unemployment Rate (3m) (Sep) 4.5%/4.5%
10:00 (EU) – GDP (QoQ) Q3 Flash 2.2%/2.2%
13:30 (US) – Retail Sales (MoM) (Oct) 0.7%/0.7%
17:00( US) – Fed’s Bostic speech (centrist)
20:30 (US) – Fed’s Daly speech (centrist)
Wednesday
07:00 (UK) – CPI (YoY) (Oct) 3.9% /3.1%
13:30 (CAD) – BoC CPI Core (YoY) (Oct) 3.7%
14:10 (US) – Fed’s Williams speech
16:00 (US) – Fed’s Bowman speech (centrist)
17:40 (US) – Fed’s Waller speech
17:40 (US) – Fed’s Daly speech (centrist )
21:05(US) – Fed’s Evans speech (dove)
21:10 (US) – Fed’s Bostic speech (centrist)
Thursday
(TRY) – The Turkish Central Bank interest rate decision 15%/16%
Friday
08:00 (EU) – ECB’s President Lagarde speech
13:30 (CAD) – Retail Sales (MoM) (Sep) 2.0%/2.1%
15:45 (US) – Fed’s Waller speech
17:15 (US) – Fed’s Clarida speech (centrist)
Further Points:
-Will UK inflation hit the highest level in a decade?
-Will US retail sales accelerate into the holiday season?
-Will Turkey's central bank risk another rate cut? The lira is already 25% down this year, is teetering on the brink of 10 to the USD.
RUB on the Ground
-On Friday RUB was under pressure for the whole day due to new geopolitical concerns, as tensions remain near Belarus-Poland border as week as the situation near Ukraine border & in the Black Sea also remains on edge as Russian troops gather in numbers.
-We hear there was solid outflow from all types of accounts (we consider this outflow as a partial reduction of long RUB positions, which are still at an extremely large level).
-Fortunately, with the start of tax payments for this month, we might see some bounce in RUB. Oil remains supportive above $80 and carry trade remains still attractive. We expect USD/RUB to trade in a 71.90-72.70 range today (without further escalation of geopolitical situation).
COP26: Fossil Fuels on the Centre Stage of Negotiations
For the first time, phasing out fossil fuels has been discussed at a COP summit, and was put at the centerstage of the COP26 Summit in Glasgow. Efforts were made to discuss the exit of coal within a targeted timeline. During the G20 Summit in Rome one week ago, exiting coal was already a debate, with countries agreeing to stop the oversees financing of coal plants.
Coalitions were made between countries such as the UK and other EU member states, to stop the use and financing of coal abroad and domestically. However, the timelines have become slightly more broad, with developed countries agreeing to exit coal in the 2030’s, rather than by 2030, the original target.
However, phasing out of coal is a highly debated issue in the global economy, with developed economies reliant on coal such as the US or Australia, and many developing countries such as China and India, not agreeing on set targets. Therefore, countries such as China, India or Australia were heavily targeted during the negotiations. Developing countries such as India, are arguing that meeting their poverty reduction targets depends on high economic and industrial growth, possible through the continued use of fossil fuels. Furthermore, the talks on energy transition are taking place in the midst of an energy crisis, where there are shortages and rising prices of gas and coal. In October, coal has reached $300 a tonne in Europe. Renewables energies are struggling to meet rising energy demands, with fossil fuels having to fill in the energy gap. China especially, has been experiencing a deep-rooted energy crisis, and is struggling to increase coal supplies to match rising demands, as it has been slowly downsizing its coal mines and power plants to meet health and environmental targets. Domestically, China has agreed to phase out of coal by 2050, and has also agreed to stop the oversees financing of coal plants. China, as well as India, have therefore agreed to ‘phase down’ on coal rather than ‘phase out’. Controversially, the US has also failed to sign the global agreement aimed to stop coal usage and financing, despite Biden’s 2035 carbon-free electricity target. COP26 therefore ended on an ambiguous note regarding fossil fuels. But the phasing out of coal is ultimately inevitable, as it will continue rising in price as it becomes a scarcer resource in the years to come.
Chart of the Week - EUR/USD
Major Resistance: 1.1565
Resistance: 1.1495
Support: 1.1417