Daily Market Outlook, November 12, 2021

Overnight Headlines

Asian equity markets were mostly positive after strong US inflation data had weighed on sentiment earlier in the week. Bond markets, in contrast, remained lower as the upside US inflation surprise led to higher yields. One news item that market participants will keep a watch on is reports that the US warned allies that Russia may be planning to invade Ukraine.

There are no major UK data releases today, although BoE MPC member Haskel is scheduled to speak on “Measuring Intangible Assets and their Contributions to Growth”. It’s the last day of COP26, although negotiations may spill over into the weekend. Also, Lord Frost will meet EU Commission VP Sefcovic to discuss the Northern Ireland Protocol.

UK attention turns to next week’s key reports, including updates for inflation and the labour market. Annual headline CPI inflation is expected to increase from 3.1% towards 4% in October, and is set to peak near 5% in the coming months. The labour market data will mostly cover September, so more focus is likely to be on next month’s release which will reveal how unemployment fared in October, i.e. in the month after the end of the furlough scheme. UK retail sales and GfK consumer confidence are also due next week.

In the Eurozone, there will be some interest in this morning’s industrial production figures for September. There was another dismal outturn in data already released for Germany where shortages of intermediate goods appear to be having a significant impact on production. Expect a decline of around 0.3% in today’s Eurozone data, suggesting that industrial output has broadly flat-lined in the past two quarters. Still, next week’s Eurozone Q3 GDP update is expected to confirm growth of 2.2%q/q, thanks to stronger services activity.

In the US, rising inflation has adversely affected consumer sentiment in recent months. However, the decline in the prevalence of the delta variant and stronger jobs growth may offer some support to the University of Michigan’s consumer sentiment index. Look for a rise from 71.7 to 72.5 in November, although that would still be below levels that prevailed in the first half of the year.

US Treasury yields remained higher in Asia overnight after strong inflation data led to speculation the Fed may accelerate its tapering of asset purchases. The US dollar has outperformed this week, resulting in GBP/USD falling below 1.34 for the first time this year.

(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )

EUR/USD: 1.1450 (1.2BLN), 1.1475-85 (601M), 1.1500 (789M), 1.1540-50 (2BLN)

GBP/USD: 1.3320 (792M), 1.3400-20 (311M)

EUR/GBP: 0.8520 (440M), 0.8625 (459M)

AUD/USD: 0.7300 (360M), 0.7370-75 (720M), 0.7380-85 (1BLN)

AUD/NZD: 1.0490-1.0510 (356M)

USD/CAD: 1.2485-90 (1.6BLN), 1.2510-15 (1.1BLN), 1.2575 (320M)

1.2620-25 (507M), 1.2635-45 (634M)

USD/JPY: 113.90 (417M), 114.00 (1.9BLN), 1.1425 (286M)

EUR/JPY: 130.70 (316M)

EUR/NOK: 9.7500 (1.2BLN), 10.00 (1.7BLN), 10.20 (1BLN)

EURUSD Bias: Bearish below 1.17 Bullish above

GBPUSD Bias: Bearish below 1.37 Bullish above.

USDJPY Bias: Bullish above 112.50 Bearish below

AUDUSD Bias: Bearish below 0.75 Bullish above