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Covid-19 Vaccine, the aftermath of the U.S election and economic calendar

USD

Last week was a roller-coaster for market participants, as the U.S dollar continued to show significant volatility in the aftermath of the U.S election and unveiling the story of a vaccine breakthrough, which fueled positive market sentiment. In the upcoming week, the political backdrop remains a source of uncertainty with vote recounts and legal cases, as well as whether the White House and Congress will reach a final agreement for another stimulus package. Key figures coming up:

  • On Tuesday (11/17): Retail Sales (Oct) | Industrial Output (Oct) | Business Inventories (Sep)
  • On Wednesday (11/18): Building Permit and Housing Starts (Oct)
  • On Thursday (11/19): US jobless claims (14-Nov)

EUR

With Covid-19 cases spiking higher across many countries in the European Union, there is a sense that Q4 will show another sharp and long contraction of industrial activity, along with a highly pressured labor market. Thus, consumer confidence numbers on Friday will provide valuable insight into the impact of new Covid-19 restrictions. New restrictions on social mobility, as well as business activity, were common across much of the eurozone countries in the past weeks. Key figures coming up:

  • On Tuesday (11/17): Euro area construction output (Sep)
  • On Wednesday (11/18): Consumer Price Index (Oct) | Product Price Index (Oct) | ECB non-monetary policy meeting
  • On Friday (11/20): Euro area consumer confidence (Flash, Nov) 

GBP

Trade negotiations between the UK and EU are again set to continue on Monday in Brussels, after another week of divided talks. The scarcity of new information on Brexit progress and dubious statements by officials and negotiators involved both signaled that the main obstacles (i.e. competition rules and fishing rights) still persist. However, the market’s odds appear stacked in favor of a deal being done, although there is no certainty. In the coming week, the U.K macro agenda is busy with Bank of England Governor Andrew Bailey set to speak on Tuesday at the National Conference, UK inflation data is due on Wednesday, and UK consumer confidence and retail sales are expected on Friday. Key figures coming up:

  • On Tuesday (11/17): Andrew Bailey: The CityUK’s National Conference 2020
  • On Wednesday (11/18): Consumer Price Index (Oct) | Product Price Index (Oct)
  • On Thursday (11/19): Confederation of British Industry (CBI) Industrial Trends Orders (Nov)
  • On Friday (11/20): Consumer Confidence (Nov) | Retail Sales (Oct)

JPY

Financial markets saw a mixed order flow over the last week in an attempt by traders to track the Covid-19 vaccine breakthrough and its impact on market sentiment. As the risk-off sentiment faded days after the unveiled vaccine story, investors moved back into the safe-haven currency on concerns that a successful test of a Covid-19 vaccine might not be enough to offset the economic damage, as well as its availability, is doubtful. Japan will on Monday release final September numbers for industrial production, which might confirm that the industrial activity continued to recover in September. On Friday, the spotlight will turn to the au Jibun Bank/IHS Markit Flash Japan Composite PMI for November. Key figures coming up:

  • On Monday (11/16): Japan Industrial Output (final, Sep)
  • On Tuesday (11/17): Exports and Imports (Oct)
  • On Thursday (11/19): National Core CPI (Oct)
  • On Friday (11/20): au Jibun Bank/IHS Markit Flash Japan Composite PMI (Nov)

CAD

It is expected that the reports on retailing, wholesaling, or manufacturing will not diverge in any particular direction from the flash estimates already provided by Statistics Canada. Canadian inflation on Wednesday should draw the investor’s attention, however, it has been muted since the Covid-19 pandemic began and that is likely to show that in October the inflation continued unchanged. As a result, inflation should not be a limiting factor for either fiscal or monetary policy future decisions. Key figures coming up:

  • On Tuesday (11/17): Wholesale Sales (Oct) | Bank of Canada Governor Tiff Macklem participates in Public Policy Forum panel "Sustainable Finance and the Transition to Low-Carbon Economy" | Housing Starts (Oct)
  • On Wednesday (11/18): Consumer Price Index (Oct)
  • On Thursday (11/19): ADP Nonfarm Employment Change
  • On Friday (11/20): Retail Sales (Sep) | New Housing Price Index (Oct)

MXN

In its monthly scheduled meeting last Thursday (Nov, 12th), Mexico’s Central Bank’s Board kept its target rate unchanged at 4.25%, “pausing” temporarily the easing cycle and keeping an eye on the country’s inflation. At the current 4.25% level for the policy rate, the real rate is approaching zero, while headline inflation (4.1% in October) and inflation expectations have moved higher, away from the 3% target. The Board highlighted in its statement that the balance of risks for inflation remains uncertain, with factors implying both faster and slower price increases. It is a quiet week on the economic data front. Key figures coming up:

  • On Monday (11/16): National Holiday - Revolution Day

CNY

There were Important updates to the economic picture in China already earlier today. China’s industrial output rose at a faster-than-expected pace in October as factory production continued to expand amid effective Covid-19 control and government policies to boost demand and consumption. Industrial output climbed 6.9% in October from a year earlier. Meanwhile, Retail sales rose 4.3% year-on-year and continued to recover as the world’s second-largest economy emerged from its Covid-19 slump. Loan Prime Rate data on Thursday is also widely awaited. Key figures coming up:

  • On Monday (11/16): House Price Index (Oct) | Fixed Asset Investment (Oct) | Industrial Output (Oct) | Retail Sales (Oct) | Jobless Rate (Oct)
  • On Thursday (11/19): PBoC Loan Prime Rate

BRL

The past few weeks have been one wild ride for financial markets in Brazil. Even though Brazilian growth continued to rebound strongly from the Covid-19 shock, misunderstandings and miscommunications among top officials in the federal government increased investor’s concerns about the public spending cap, who fear a sharp deterioration in the country’s fiscal position. This week will be relatively quiet on the data front, with market participants waiting for Wednesday to receive the balance of payments data for October, where the country’s robust domestic demand is expected to lead to a modest reduction in the current account surplus. Key figures coming up:

  • On Wednesday (11/18): Foreign Exchange Flows (Nov)
  • On Friday (11/20): Federal Tax Revenue

Quick Insights

USD: The USD continued to show significant volatility in the aftermath of the U.S election

USD: The USD continued to show significant volatility in the aftermath of the U.S election

EUR: A sense that Q4 will show another sharp and long contraction of industrial activity

EUR: A sense that Q4 will show another sharp and long contraction of industrial activity

GBP: Trade negotiations between the UK and EU are again set to continue on Monday in Brussels

GBP: Trade negotiations between the UK and EU are again set to continue on Monday in Brussels

JPY: Japan will release final September numbers for industrial production

JPY: Japan will release final September numbers for industrial production

CAD: Canadian inflation on Wednesday should draw the investor’s attention

CAD: Canadian inflation on Wednesday should draw the investor’s attention

MXN: Mexico has “paused” temporally the easing cycle

MXN: Mexico has “paused” temporally the easing cycle

CNY: Industrial output climbed 6.9% in October from a year earlier

CNY: Industrial output climbed 6.9% in October from a year earlier

BRL: The past few weeks have been one wild ride for financial markets in Brazil

BRL: The past few weeks have been one wild ride for financial markets in Brazil

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