Daily Market Pulse

Brexit trade talks continue and left the market disappointed

7 minute read


News about fiscal stimulus and any developments on the Covid-19 front, will likely take center stage in a light week for data. The first is an important near-term trigger that can further support the risk-appetite, hence leading the USD to continue its downward trend during the upcoming week. Congress seems to be making progress on another stimulus package of $908 billion, including extended unemployment benefits and more support for small businesses. This becomes even more important in the face of a huge second wave is pressuring state governments to respond with restrictions on activity, further adding concerns over the labor market. On that note, the Job Openings and Jobless Claims measured by the JOLTS data and Department of Labor, respectively, are set to report further deterioration. Key figures coming up:

  • On Monday (12/7): Consumer Credit (Oct)
  • On Tuesday (12/8): EIA Short-Term Energy Outlook | API Weekly Crude Oil Stock 
  • On Wednesday (12/9): Wholesale Inventories (Oct) | MBA Mortgage Applications (week to 4 Dec) | JOLTs Job Openings (Oct)
  • On Thursday (12/10): Consumer Price Inflation (Nov) | Jobless Claims (week to 5 Dec)
  • On Friday (12/11): Consumer Confidence, Uni. Michigan (Prelim, Dec) | Producer Price Inflation (Nov)


It’s a busy week ahead in Europe with several key releases to watch out for. Spain, Italy, Germany and France’s industrial production releases for October come as early indicators of GDP growth of these economies in the final quarter of 2020. Meanwhile, the European Central Bank (ECB) on Thursday will announce its final policy decision for 2020. ECB growth concerns are also concentrated on the region’s services economies, where the activity is being hit especially hard by the current restrictions on mobility and social contact. Moreover, the euro´s recent strength will also be a hot topic in the meeting’s agenda, the ECB will look for ways to fight against it without rate cuts. Apart from that, the recent political stalemate involving Poland and Hungary will be eagerly watched. Key figures coming up:

  • On Monday (12/9): Germany Industrial Production (Oct)
  • On Tuesday (12/8): Eurozone GDP (3rd est., Q3) | Eurozone Employment (Q3) | Germany ZEW Sentiment Survey (Dec) | Italy Industrial Production (Oct)
  • On Wednesday (12/9): Germany Trade Balance (Oct) | Spain Industrial Production (Oct)
  • On Thursday (12/10): France Industrial Production (Oct) | ECB Monetary Policy Decision and Press Conference


Those who were expecting a possible Brexit deal over the weekend were left disappointed. However, there are signs of hope, as the U.K. and the European Union strive to finalize a deal before Monday evening. Fishing rights are still the major deadlock, however, a compromise on the longstanding stumbling block of access to British fishing waters is starting to emerge. The final deal needs to be approved unanimously by all member states and thereafter the EU Council needs to approve the possible deal before it could be sealed before midnight 31 December, when the U.K. will leave the European single market and customs union. Turning to data, the three-month average GDP figure will be published, providing an insight into how much the second lockdown hit activity, alongside detailed figures for industrial production plus construction and services output. Key figures coming up:

  • On Monday (12/7): Halifax House Price Index (Nov) | BRC Retail Sales (Nov)
  • On Wednesday (12/9): RICS House Price Balance (Nov)
  • On Thursday (12/10): GDP including industrial production, construction, and services output (Oct) | Trade Balance (Oct)
  • On Friday (12/11):   Bank of England (BoE) Financial Policy Committee (FPC) Meeting Minutes | BoE Financial Stability Report 


The Japanese releases include a revised third-quarter GDP estimate on Monday, which should confirm the strong rebound in national output from the heavy losses in the second quarter. However, market participants will likely pay more attention to Household Spending and Machinery Orders, which are indicators of growth in the current quarter. Although Japan avoided the vast number of Covid-19 cases and deaths seen in other countries across the world in Q2 and Q3, the downside growth risk intensified with accelerating Covid-19 caseloads, both locally and globally, in Q4. Key figures coming up:

  • On Monday (12/7): GDP (Final, Q3) | Household Spending (Oct) | Bank Lending (Nov)
  • On Tuesday (12/8): Machinery Orders (Oct)
  • On Wednesday (12/9): Producer Prices (Nov)
  • On Thursday (12/10): Economy Watchers Current Index (Nov)


The Bank of Canada (BoC) meets to set the interest rates at the midweek, where they will likely cite additional fiscal stimulus as a positive for the outlook. Indeed, the key item to watch for in the statement is whether the BoC opt to mention the CAD’s appreciation as a potential drag on growth. That would typically be a warning signal for foreign exchange markets, but the Bank has limited room now, in terms of how to cope with it. The CAD is likely to continue to cheer the latest OPEC+’s decision, which gently eased oil production from January, leading analysts to forecast that oil price may rise to $60 per barrel. Key figures coming up:

  • On Monday (12/7): Ivey Business School PMI (Nov)
  • On Wednesday (12/9): Bank of Canada (BoC) monetary policy decision and report
  • On Thursday (12/10): BoC Deputy Governor Beaudry Speaks 
  • On Friday (12/10): Capacity Utilization Rate (Q3)


The background remains favorable to the Mexican peso, with increased carry interest, higher oil prices, as well as optimism over the near-term prospect that U.S-Mexico trade relations will improve. The benchmark interest rate is still unchanged at 4.25%, attracting foreign capital and favoring the MXN, however, recently President Lopez Obrador nudged the bank to lower interest rates to spur lending. As an oil-linked currency, the MXN is also likely to continue to cheer the latest OPEC+’s decision, which gently eased oil output next year. Lastly, pouring some cold water on the U.S-Mexico relations, President Obrador has tossed another hot potato to the U.S. President-elect Joe Biden with a proposal that would restrict U.S. agents in Mexico and remove their diplomatic immunity. Key figures coming up:

  • On Monday (12/7): Gross Fixed Investments (Sep)
  • On Wednesday (12/9): Consumer Price Inflation (Nov)
  • On Friday (12/11): Industrial Production (Oct)


PMI figures confirmed China’s impressive economic recovery in November, updates of trade, inflation, money supply, and new loan data will be combed for confirmatory signs that the recovery is accelerating. In general, the USD/CNH pair has plunged 7.3% since June, as the Chinese yuan is hovering close to its highest level since June 2018. Key figures coming up:

  • On Monday (12/7): Exports, Imports, and Trade Balance (Nov)
  • On Wednesday (12/9): Consumer and Producer Price Inflation (CPI) (Nov)
  • On Thursday (12/10): M2 Money Supply and New Loans (Nov)
  • On Friday (12/11): Foreign Direct Investment (FDI) (Nov)


Brazil’s Central Bank (BCB) is expected to change its forward guidance after inflation spiked higher during October and November and the economic recovery showed signs of progressing at a fast pace. Essentially, there was no change in the fiscal scenario so far, but critical uncertainties remain. Key sticking points are related to the renewal of the emergency aid, to future social programs, and to the plausibility of passing the structural reforms that are still unsolved. Key figures coming up:

  • On Monday (12/7): Brazil’s Central Bank Focus Market Readout 
  • On Tuesday (12/8): IBGE Consumer Price Inflation (CPI) (Nov)
  • On Wednesday (12/9): Brazil’s Central Bank Monetary Policy Decision
  • On Thursday (12/10): Retail Sales (Oct)
  • On Friday (12/11): IBGE Service Sector Growth (Oct)

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