RBC Capital Markets

Week ahead: An effectively shortened week ahead due to the US Thanksgiving holiday. President-elect Biden is expected to make his initial cabinet appointments this week. We do not anticipate any major market moving news out of the November FOMC minutes (Wednesday). Last month’s FOMC statement and press conference were quite predictable. Other US data releases include October personal income & spending, and the second reading of Q3 GDP (both Wednesday). Flash PMIs from UK and the euro area are due (see EUR & GBP), as are central bank meetings in South Korea and Sweden (see KRW & SEK).

GBP: The UK entered a second national lockdown in November, but with less restrictions than in the spring lockdown, and the sectors most directly impacted were already operating at well below pre-pandemic levels. The new restrictions also have less direct impact on manufacturing and construction. Overall, we expect the November survey to show a large slump in the services PMI (Monday), from last month’s 51.4 to 40.8. Chancellor Sunak will also unveil the Treasury’s spending review on Wednesday.

EUR: This month’s euro area “flash” PMIs (Monday) should see a sharp fall in the services reading as a consequence of the various national lockdown measures. The fall in the services print, however, is unlikely to be as large as in the spring given the less stringent nature of the lockdowns, plus economic activity starting from a lower base. France is likely to see a particularly sharp contraction while the German figure is likely to be less affected, given the differing nature of their respective lockdowns. The PMI release will also see the publication for the first time of new “Eurozone Big-2” and “Eurozone excluding France and Germany” PMIs. Other notable data releases include Germany IFO survey (Tuesday) and France CPI (Friday). The ECB October meeting’s minutes will be out on Thursday.

KRW: The market anticipates that the Bank of Korea will again hold rates steady on Thursday and continue to let fiscal policy take precedence.

SEK: The Riksbank meeting (Thursday) is widely expected to see policy left unchanged. This would be followed by Sweden Q3 GDP (Friday).

AUD: Australia’s Covid-19 restrictions precipitated a sharp fall in Q2 capex and a downward revision to spending plans in the last survey. The Q3 Capital expenditure and expected expenditure survey was taken over the last 6-8 weeks as Victoria began to emerge from its most recent restrictions, amid additional fiscal and monetary stimulus. The partials point to a flat outcome for Q3 capex but we would expect some upward revision to spending plans for this fiscal year.

Citi

Vaccine and fiscal hopes have pressured the USD for the most part in Asia. Two currencies standout in G10 in particular: GBP and NZD. In the former, Brexit optimism from Chancellor Sunak appears to be at play, while in the latter, a strong Q3 retail sales beat is likely driving outperformance. EM FX has traded relatively quietly in comparison but is still nonetheless up vs the USD too (except CNH on mild US-China tensions). More specifically, KRW outperforms following 20d trade data as well as offshore bond inflows. Bigger picture, these moves come in line with CitiFX Strategy’s bearish USD expectations into 2021.

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