Credit Agricole

Asia overnight

Investors are in a bit of a holding pattern ahead of key US economic data releases as well as the publication of the FOMC minutes later today. At the time of writing, Asian bourses were about equally divided between those trading lower and those trading higher. S&P 500 futures were slightly weaker. In G10 FX, the NZD was the big mover, declining after the RBNZ hiked rates by 25bp rather than 50bp. The JPY was the modest outperformer during the session.

EUR: at least spared by solid EZ flash PMIs Downside pressures persist for the EUR, as it was still able to avoid another setback thanks to the publication of solid Eurozone flash PMIs for November. While the economists surveyed by Bloomberg expected a continued slide to fresh 9M lows, the composite index instead managed to bounce back by more than 1.5 point to 55.8 this month. Germany was surely under closer scrutiny and the fact that the latest Covid wave has reportedly had very little impact on activity momentum so far could be seen as a slight positive, although business confidence still suffered from surging costs.

The market may still want the confirmation from today’s IFO survey that the German economy has for now withstood the latest pandemic resurgence fairly well, although a more convincing EUR recovery could wait until the risks of a stringent lockdown are significantly tamed. Such lingering concerns have indeed recently prevented the EUR from showing the slightest reaction to the less dovish-sounding comments made by several ECB members. Isabel Schnabel stressed that inflation risks are skewed to the upside and that the PEPP remains on track to end in March despite the latest resurgence of the pandemic. Klaas Knott shared t

Citi

European Open

RBNZ was front and centre today, with a 25bps hike to 0.75%. NZD slipped by 0.62% as the hike disappointed markets which were split between a 25bps and 50bps hike. The press conference later was balanced, with Governor Orr stating that 25bps steps are the expectation. A stronger USD and a dipping NZD spilled over into AUD as well, which initially saw a 0.3% dip although it pared some of its losses as the day went on. USDJPY ticked up to 115 levels again, which we note saw a swing lower on the London open yesterday. WTI and Brent maintained their gains from yesterday, following announcements of a coordinated SPR release in coordination with China, Japan, India and South Korea to curb oil prices. We note the oil gains yesterday had tones of “Buy the rumour, sell the news”. Over in the EM space, SGD saw GDP beat expectations, although it remained weak against the dollar. USDSGD sits near YTD highs. THB slipped 0.7% on the day despite comments about reopening, driven by a strong USD as well as positioning flows.

Looking ahead, we see a slew of data from the US with the FOMC minutes being the highlight. We see the weekly jobless claims report at 13:30 GMT, followed by the PCE Core Deflator at 15:00 GMT, and the FOMC Meeting Minutes at 19:00 GMT. We also see Germany IFO data at 09:00 GMT, while we note BOE's Tenreyro speech at 14:30 GMT in light of Covid and Brexit developments. On the EM front, we see MXN Bi-Weekly CPI at 12:00 GMT.