RBC Capital Markets

USD: The flow of November manufacturing surveys continues with the US ISM expected to slip slightly after the sharp rise in the October survey. UK and EZ releases are final versions of data already released. We also have Eurozone flash CPI data for November and Q3 GDP data in Canada (CAD). The OECD publishes its Economic Outlook.

AUD: After last month’s big changes, the RBA left everything unchanged at this month’s meeting and there was very little new news in today’s short post‐meeting statement. An updated set of forecasts will be delivered at the 5 Feb Statement on Monetary Policy with Governor Lowe set to deliver his Semi Annual Testimony on Monetary Policy shortly thereafter. RBA Governor Lowe appears before the House Economics Committee tonight. Elsewhere, the Q3 current account surplus narrowed less than expected and October building approvals were surprisingly strong.

GBP: The government will win today’s vote on the latest form of COVID‐19 restrictions as Labour has said it will abstain rather than vote against the government. The interesting aspect will be the extent of the rebellion with in the government.

CAD: The FY20/21 deficit was revised to CAD381.6bn in last night’s fall economic statement (FES) from CAD343.2bn in the July fiscal snapshot. Preliminary Q3 GDP estimates from StatsCan suggest an annualized gain of 48% (10.3% q/q) and we see no compelling reason to deviate from this in our forecast. Household sectors (consumption, housing) and a massive inventory build should be the stand‐outs in the breakdown. The GDP nowcast for October may be the most interesting element. Relatively solid early indicators suggest a mild gain (0.2‐0.3%) before expected declines in November and December. USD/CAD tested and held above key double bottom support at 1.2952 yesterday, with resistance coming in at 1.3029 and 1.3052.

EUR: Our economists are not expecting much change in euro area inflation this month and expect today’s estimate from Eurostat to show it unchanged at ‐0.3% y/y, which would mark a fourth consecutive month of negative inflation. Some of the factors behind the current weakness of inflation are transitory; Germany’s temporary VAT cut, oil price dynamics and the disruption the pandemic has had on the traditional pattern of sales. However, clearly the ECB are not satisfied with explaining away the latest developments and are getting worried about how persistent this current bout of weaker inflation may prove to be. JPY: October labour market data were close to expectations.


The month-end USD bid has reversed in today’s Asia session, with EUR, GBP, AUD and NZD all notching gains vs the greenback. It’s a similar story in EM, with CNH and INR leading the pack, closely followed by strength in SGD, MXN and ZAR. Equities trade in tandem too, with yesterday’s sell-off being erased, to see S&P futures back at 3650, above Tuesday highs. The broader Asia equity complex is also a sea of green.

In terms of data, RBA came and went with little volatility after the bank reiterated recent guidance and offered no pushback on the currency as we outlined previously. Ahead, watch out for a range of final PMI prints across EUR, GBP and USD. More importantly though, we await USD ISM manufacturing, as well as testimonies from Fed Chair Powell and Treasury Secretary Mnuchin. ECB President Lagarde and Janet Yellen (now nominated for Treasury Secretary under Biden) also speak, amid a range of other Fedspeak. In EM, we are due PMIs across the region, CZK GDP, HKD retail sales, PLN & PEN CPI, CLP economic activity and COP trade data.

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