Citi
European Open
Markets were relatively muted on a Tuesday morning, with the Biden-Xi summit taking majority of the headlines. We have seen limited headlines since the end of the event, with the ones available suggesting a respectful conversation covering trade, broader health concerns and the stance on Taiwan. Earlier in the day, we saw USDCNH move lower by 0.3% on optimism over the talks. KRW and AUD followed the stronger CNH. Australia saw RBA minutes released, which reiterated earlier points made. We note that wage data remains at the forefront for the RBA.
Looking ahead, the US sees some events that are noteworthy following last week’s higher Michigan Sentiment. We see USD retail sales at 13:30 GMT, followed by IP at 14:15 GMT. We see a slew of Fedspeak on the agenda as well, although we do not expect them to be market moving. Front and center will be the GBP employment data at 07:00 GMT. EUR will see Eurozone Employment YoY and Eurozone GDP SA QoQ at 10:00 GMT, while CAD will see housing starts at 13:15 GMT. SEK will see Swedbank Economic Outlook at 06:00 GMT. On the EM front, we see HUF’s central bank decision at 13:00 GMT, where we expect a 30bp hike to 2.10%. This will be preceded by HUF GDP at 08:00GMT. BRL welcomes an activity index and economic activity at 12:00 GMT, following a holiday yesterday. COP will see GDP at 16:00 GMT.
An eye on the US
USD held flat on the Asian morning. Xi-Biden summit dominated market talk during Asian trading hours. Despite no concrete details, as the meeting paused for its half-way break, expectations for further repair of relations between the nations appeared to rise, pushing USDCNH down as much as 0.3%. AUD and KRW also benefited given the trade linkages, while USD struggled.
CIBC
Key Headlines
- King of dove, Neel Kashkari said Fed Red shouldn’t overreact to inflationary pressures that are likely to prove temporary. Overreacting could lead to worse long-term outcome for the economy.
- RBA November offered nothing new, it said the board is prepared to be patient, risks to inflation forecast has shifted to upside. My colleague Dixon pointed out that outlook for inflation in Australia differed from other advanced economies; participation rate bounced back quickly, flexibility in labour supply implied less upward pressure on wages.
- Initial headlines out of White House and Xinhua presented a friendly virtual meeting between Presidents Xi and Biden, no knife throwing, at least for now. Biden said it was both his and Xi’s responsibility to ensure that ties did not veer into open conflict, and called for common sense guardrails in the relationship. Xi said he was pleased to see his “old friend” Biden. No mention of Taiwan, Xinjiang, human rights issue, no South China Sea. According to SCMP, the Biden-Xi virtual meeting is supposed to last several hours.
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