RBC Capital Markets

Week ahead: President-elect Biden will lay out his fiscal stimulus proposals on Thursday. Fed Chair Powell is scheduled to appear at a separate webinar that same day. Fed Vice Chair Clarida will also discuss the Fed’s new policy framework on Wednesday. Meanwhile, the equities quarterly earnings season will kick off later in the week. Other key data releases include US CPI inflation (Wednesday), Germany 2020 GDP (see EUR), US retail sales (Friday), China credit and financing (see CNY), and UK November GDP (see GBP). JPY: Japan’s November trade balance (Tuesday) and machine tool orders (Thursday) are on tap this week.

EUR: The euro area industrial production (Wednesday) and Germany 2020 GDP (Thursday) data releases are the key ones from the single currency area this week. ECB President Lagarde is also scheduled to make remarks at a conference on Wednesday. CNY: The China December credit and financing data will be released sometime this week, with December seasonality expected to show a deceleration in the credit channel. The 1-year medium-term lending facility rate is widely expected to be held steady at 2.95%.

GBP: The UK November GDP estimate (Friday) will only be picking up the impact of the second lockdown. In the wake of the November PMI survey, we argued that the emerging picture was that the impact of the second lockdown was much less severe than the one in spring 2020. Google mobility data suggests that the impact of the measures was mainly felt in the retail and hospitality sectors. In addition, unlike during the first lockdown, manufacturing and construction were allowed to remain open. An important difference between the November and both the spring 2020 and current lockdowns, however, is that schools remained open in November. Therefore, though we still expect GDP to have posted a sizable contraction of -5.7%m/m in November, we anticipate the impact of the current lockdown on activity to be much more pronounced.

KRW: There is an overwhelming consensus that the Bank of Korea (Friday) will stand pat on policy. The recent stabilisation in the USD/KRW exchange rate takes the urgency off the currency issue for now.

NOK/SEK: From Scandinavia, we get Norway November GDP (Tuesday) and Sweden CPI inflation (Friday) this week, on top of the Norwegian inflation numbers today.

CAD: The BoC Business Outlook Survey (to be released today) has not been particularly useful during the pandemic period, with the lag from the survey period to release date challenging. The former should be mid-November to early December, which was characterized by positive vaccine developments alongside increased virus case counts and some lockdowns in the GTA, but before the vaccine rollout or the latest virus mutations. We expect the BoC comments to focus on differences across sectors (goods side performing well, concerns in some services sectors), and will watch for any indications on exports after positive comments from Markit in the latest manufacturing PMI.


Many USD risk events to watch this week.

Amid rising inflation expectations and equity prices, Fed officials have begun to be asked about the possibility of tapering. For now, they highlight that it’s too early, but as the risk rally in part is built on Fed dovishness, Fed-speak is worth watching closely. This week we await: Bostic (Mon and Thu), Kaplan (Mon and Thu), Brainard (Tue and Wed), George (Tue), Rosengren (Tue and Thu), Harker (Wed), Clarida (Wed), and Powell (Thu).

Note too that President Elect Biden will outline his fiscal plans on Thursday this week. This is expected to run into trillions of USDs:

Washington Post outlines Biden’s comments last Friday, where he stated that this could include boosting stimulus payments to $2,000, extending unemployment insurance and billions in aid to city and state governments.

“The price tag will be high,” he said, adding, “the overwhelming consensus among leading economists left, right and center is that in order to keep the economy from collapsing this year, getting much, much worse, we should be investing significant amounts of money right now.”

This came after the latest NFP print came in worse than expected at -140k (50k estimated, 245k prior). Mitigating this was 135k of upward revisions to the prior two months and the unemployment rate holding steady at 6.7% rather than rising to 6.8% as expected.

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