Daily Market Outlook, November 18, 2021

Overnight Headlines

N.Z. 2-Year Inflation Expectations Rise To 10-Year High
Fed's Evans Says Taper To Take Until Mid-2022 To Complete
US Trade Rep Admits Need For ‘Course Correction’ In Asia
Euro Hit By Bets ECB Monetary Policy Will Diverge From Peers
Yields Fall As Buyers Step In, Tepid Demand For 20-Year Auction
Oil Under Pressure As US Looks To Lead SPR Shock Treatment
China Reserve Bureau Working On Crude Oil Release
NFT Marketplace OpenSea Offered $10 Billion Valuation
Global Stock Markets Stalled In Thursday Asia Trade
China Huarong Gets $6.6 Billion Equity Injection In Bailout
Chinese Developer Yango Scrambles to Avoid Missing Bond Payment
Nvidia Forecasts Upbeat Revenue On Metaverse Hopes
Cisco Falls As Sales Forecast Miss Estimates On Supply Issues

The Day Ahead

Asian equity markets were mostly lower, with Chinese stocks weighed down by disappointing earnings in the tech sector, while reports of an economic stimulus package in Japan reduced losses in the Nikkei-225 index. Meanwhile, global oil prices fell on reports of a possible coordinated release of oil reserves by countries including the US and China.

There are no major UK or European data releases in today’s calendar. However, we will see updates on UK consumer behaviour early tomorrow from the GfK consumer confidence report and official retail sales. Consumer confidence fell sharply over the past two months to 17 in October, its lowest level since February, and we forecast a further decline to 18 in November. That may reflect concerns about the impact of higher inflation on potential spending power.

Meanwhile, the official UK retail sales measure has now declined for five months in a row. However, last week’s GDP report showed that overall consumer spending continued to rise in Q3, suggesting that there has been a switch in purchases away from goods towards services which are not counted as part of retail sales. Look for a pickup in retail sales in October, but still expect only relatively modest growth of 0.5%, a sign that the spending remains subdued ahead of the key pre-Christmas period.

US watchers will focus on the release of the Philadelphia Fed and Kansas City Fed manufacturing surveys, as well as weekly jobless claims data. Earlier this week, the NY Fed Empire manufacturing survey’s general business conditions index was stronger than expected, but it remains to be seen whether that is reflected in today’s other regional surveys. A notable result from the Empire survey was that it signalled further upward price pressures.

G10 FX Options Expiries for 10AM New York Cut

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

EUR/USD: 1.1300 (295M), 1.1360 (440M), 1.1390 (964M)

1.1465-70 (510M), 1.1495-1.1505 (2.55BLN)

USD/JPY: 114.00-10 (400M), 114.20-25 (350M), 115.00 (610M)

GBP/USD: 1.3500-20 (272M). EUR/GBP: 0.8445 (839M)

AUD/USD: 0.7300 (933M), 0.7450 (525M). USD/CHF 0.9120 (226M)

USD/CAD: 1.2500 (551M), 1.2525 (810M), 1.2540-55 (1.12BLN)

USD/ZAR 15.65-75 (385M), 15.25-30 (275M)

Standout FX option strike expiries for the week ahead

(Reuters) – The hedging of FX option strikes can influence FX price action if nearby, and more so when the strikes are large and soon to expire, so it's worth being armed with this information in advance.

Standout EUR/USD strikes Friday between 0.9110-25 on $1.3 billion.

EUR/GBP Friday has 857 million euros at 0.8515-25 and 887 million euros at 0.8600.

USD/CAD Friday has $1.6 billion at 1.2350-55 and $550 million each at 1.2370 and 1.2475.

USD/JPY Friday there are $1.3 billion between 113.90-114.00 and $1 billion at 114.20-25.