Citi

  • Risk sentiment continues to improve as US election uncertainty dissipates. Numerous news outlets have called a Biden win with 290 electoral college votes, while we continue to expect a Republican senate. On this outcome, consensus remains for a weaker USD and higher risk assets. The Asia session reflects this theme with the USD in the red vs most currencies, and equities across the region uniformly higher.
  • AUD is the Asia outperformer in G10 space, with spot +0.5% vs the USD at 0.7300 resistance. CitiFX Strategy largely views the AUD correction as over given the dovish RBA event risk has now passed and the broader outlook for the domestic and regional recovery remains intact. The team is bullish AUD against CAD and NZD, especially as the RBNZ on Wednesday is likely to maintain a dovish bias.
  • GBP underperforms AUD in Asia, having only rallied 0.2% to 1.3180 at the time of writing. This week sees the UK/EU November 15 deadline move into sight, however, Bloomberg reports that major differences still need to be bridged on level playing field rules for business, and access to British fishing waters. Nonetheless, CitiFX Strategy remains bullish GBP on more policy stimulus and expectations of a Brexit deal, which is reinforced by the US election outcome.

RBC Capital Markets

Week ahead: Given the mounting pandemic in the US, the market could start to focus back on the need for fiscal stimulus. It is unclear if even a limited US fiscal bill will be forthcoming before the inauguration in January. This is supposed to be a pivotal week for post-Brexit trade talks, which may carry over into the weekend. Oil market balance forecasts from the US EIA, OPEC and IEA are due this week. An ECB forum on Thursday will feature ECB President Lagarde, Fed Chairman Powell and BoE Governor Bailey. We have October CPI inflation data from the US (Thursday), Germany, China and Scandinavia (see EUR, CNY & NOK/SEK). Third quarter GDP reports from the euro area, UK and Japan are also pending (see JPY & GBP). Finally, look out for the RBNZ policy decision (see NZD).

EUR: Germany ZEW survey (Tuesday) and final CPI inflation (Thursday) readings are due. Euro area Q3 employment data and Q3 GDP follow on Friday.

CNY/JPY: China CPI inflation is widely forecasted to decelerate further (Tuesday). China October financing data is also set to be released during the course of the week, and a slowdown in the pace of aggregate social financing is expected, due largely to the golden week holiday. Japan Q3 GDP (Sunday) meanwhile should see a return to positive quarterly growth.

NOK/SEK: The data releases from Scandinavia this week include Norway CPI (Tuesday), Sweden CPI (Thursday), and Norway Q3 GDP (Thursday).

GBP: In September, the proportion of furloughed employees covered by the government scheme was further reduced to 70% up to a cap of £2,187.50. With government employment support being cut and the number of vacancies down 40% on pre-pandemic levels at 488k, a rise in unemployment appears inevitable and we look for the unemployment rate to increase to 4.8% in the labour market report (Tuesday). The weaker than anticipated August monthly GDP growth of 2.1% m/m prompted us to revise our Q3 GDP growth forecast to 15% q/q, down from 19% q/q previously. Moreover, the September PMI surveys suggested that the economy’s momentum waned again in September, even before the tightening of Covid-19 restrictions. In addition, more than half of the GDP growth in August came from the accommodation and food sectors and is unlikely to have been repeated in September though the monthly figure should benefit from the reopening of schools. We look for September monthly GDP at 0.8% m/m, which would leave GDP 8.6% below its pre-pandemic level at the end of Q3 (Thursday).

NZD: The RBNZ policy meeting is expected to conclude with the cash rate held steady, but the market will be anticipating details on the impending Funding for Lending Program (FLP) due to be rolled out before year-end (Wednesday). Given the recent policy easing salvos from the RBA and BoE, we are also keeping a close eye on language around RBNZ bond purchases and the currency, though our base case is for nothing new from this meeting. Looking further ahead, however, we continue to expect OCR reductions to 0% and then -0.25% in the February and April meetings.

CAD: There are no major data releases scheduled in Canada this week. BoC Senior Deputy Governor Wilkins is expected to speak via videoconference on “Exploring Life Post-COVID” on Thursday. USD/CAD is testing key double bottom support at 1.3029 as the post-election risk backdrop remains positive, with a daily close below here opening up 1.2952 and 1.2917 next on the downside. Resistance is located at 1.3099.

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