FX Weekly Insights — 13/12/21

Key Events

Monday                                                                        Consensus/Previous

          (G7) – G7 Meetings

15:30 (CA) – BoC’s Governor Macklem speech

17:30 (UK) – Governor Bailey speech

Tuesday

07:00 (UK) – ILO Unemployment Rate (3M)                        4.20%        4.30%

07:00 (UK) – Claimant Count Change                                                     -14.9k

13:30 (US) – PPI m/m                                       0.50%        0.60%

Wednesday 

          (RU) – CPI Weekly YTD                                          

02:00 (CN) – Retail Sales (YoY, Nov)                                                      4.90%

07:00 (UK) – CPI (YoY, Nov)                                              4 .80%        4.20%

13:30 (US) – Retail Sales (MoM, Nov)                                   1.00%        1.70%

13:30 (CA) – BoC CPI Core (YoY, Nov)                               3.40%        3.80%

19:00 (US) – Fed Interest Rate Decision                               0.25%        0.25%

19:00 (US) – FOMC Economic Projections                          

21:45 (AU) – GDP (YoY, Q3)                                              -1.40%      17.4%

Thursday

00:30 (AU) – Unemployment Rate s.a (Nov)                       5.00%        5.20%

00:30 (AU) – Employment Change s.a (Nov)                        200k          -46.3k

08:30 (DE) – Markit PMI Composite (Dec, Preliminary)      57.0           57.4

08:30 (CH) – SNB Monetary Policy Assessment 

19:30 (UK) – Markit Services PMI (Dec, Preliminary)                              58.5

12:00 (UK) – BoE Interest Rate Decision                                               0.10%

12:00 (UK) – BoE MPC Vote (0 Cut, 2 Hike, 7 Unchanged)

12:45 (EU) – ECB Interest Rate Decision                                               0.00%

Friday

03:00 (JP) – BoJ Interest Rate Decision                                                   0.1%

10:30 (RU) – CboR Interest Rate Decision                            8.5%          7.5%

Further Points:

-Will the Federal reserve speed up its tapering of bond purchases? More than half of the 48 economists who participated in a recent FT survey said that it was "somewhat" or "very likely" the Fed would stop adding to the size of its balance sheet.

-Will come Omicron keep the BoE on hold? the variant muddies the outlook for the domestic economy and it is expected the BoE signal that it is only a short delay to gather information on Omicron

RUB on the Ground

We heard there was some inflows from hedge funds and real money after the US CPI data on Friday and technically it finished the day below the 200 dma, which is a positive sign for RUB.

This week promises to be a really interesting one:

-Start of tax payments this month and as a result some more USD supply from exporters

-FOMC this Wednesday

-Friday market attention will be focused on the CBR meeting, where it is likely they should hike rates by another 75-100 bp

-Target a 72.70-74.00 range for this week

China: 2022 Economic Outlook and Evergrande’s First bond Default

Friday marked the end of the CPC’s annual Central Economic Work Conference, where key policymakers mapped out priorities for the coming new year. However, the conference was overshadowed by Evergrande’s debt crisis. On Monday, Evergrande defaulted on a bond for the first time, and Fitch Ratings officially announced the default on Thursday. But instead of a market breakdown, the Yuan hit a three year high against the U.S. dollar. The PBOC also cut level of reserves of banks, therefore releasing RmB1.2tn ($190bn) into the economy. Before Evergrande’s official default announcement, the Politburo suggested in a communique that there would be an easing of curbs on the real estate sector, whose downturn is representing a threat to economic growth. This could help rescue the market, which saw home prices fall in September and further declined in October - the first time in six years. Both the Politburo and the key policymakers who attended the annual economic conference are setting ‘stability’ as a main priority. This includes “actions to safeguard macroeconomic stability, keep major economic indicators within an appropriate range and maintain social stability” as the CPC is preparing for the 20th National Congress (Xinhua, 11/12/21). The goal is to limit the negative effects of Evergrande’s downfall on the broader Chinese economy. However, there are a lot of challenges ahead. China is also suffering from other pressures linked to shrinking demand, a negative effect of its ‘zero-Covid’ policy, which led to regular lockdowns of major towns and cities, as well as travel restrictions. An energy crisis and supply shocks have also shaken the country, as coal and power shortages caused soaring producer prices. China is therefore looking to continue implementing proactive fiscal policies, as well as prudent and flexible monetary policies to guarantee steady economic growth next year. It has committed to support the real economy by assisting small and medium enterprises, and microeconomic policies will aim to revitalise market entities and deepen the supply-side structural reform.

Chart of the Week - EUR/USD

Resistance: 1.1450

Support: 1.1188

Sometimes the old lines are the best ones. 1.1188 is a long-lost friend from way back in 2017. This is to show you that long term fibs to come back to say hello sometimes.

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FX Weekly Insights — 20/12/21

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FX Weekly Insights — 06/12/21