USD Firms Against Major Pairs As Divergence In Central Bank Rhetoric Is Heightened

Notes/Observations

• Germany Sept Industrial Production data misses consensus as supply-chain strains heighten.
• Markets continue to digest recent BOE rate decision after warnings in previous weeks that the central bank would have to act to curb inflation.
• ECB members continue to dial-back market rate hike expectations.
• Focus on US non-farm payroll report for clues on potential Fed lift-off.

Asia

• RBA Statement on Monetary Policy (SOMP): Committed to keeping highly supportive monetary conditions; Forecasts for cash rate broadly in line with recent market pricing. Raised Dec 2021 core inflation forecast from 1.75% to 2.25%and raised its Jun 2022 Core inflation forecast from 1.5% to 2.25%. RBA cut its Dec 2021 GDP growth forecast from 4.0% to 3.0% and cut the Jun 2022 GDP growth outlook from 4.5% to 4.0%.
• China State Planner (NDRC): Coal Inventory at power plants are at a normal level again.
• China Ministry of Finance (MOF) issued mandate related to planned issuance of EUR denominated bonds (as previously announced). To sell €4.0B in 3-year, 7-year and 12-year bonds in Hong Kong on Nov 10th.

Europe

• BOE Gov Bailey stated that was not the job of the central bank to steer markets on rates, Not surprised to see correction in markets as market rate pricing was puzzling, pricing for rate hikes was overdone.
• ECB’s Schnabel (Germany) reiterated Council view that conditions for a rate hike were unlikely to be met in 2022. Reiterated belief that see good reason that inflation will visibly decline next year.

Americas

• House to vote on President Biden’s $1.75T economic spending packages on Fri, Nov 5th.
• Sen Maj Leader Schumer (D-NY) stated that the goal was now to pass the Biden economic agenda by Thanksgiving (Nov 25th).
• House Democrats proposed increasing SALT (State and Local Tax) deduction cap to $80K (up from $10K).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.20% at 484.18, FTSE +0.49% at 7,315.24, DAX -0.01% at 16,028.15 , CAC-40 +0.35% at 7,011.99, IBEX-35 0.00% at 9,039.50, FTSE MIB +0.36% at 27,621.00, SMI +0.50% at 12,465.40, S&P 500 Futures +0.08%].
• Market Focal Points/Key Themes: European indices open modestly lower across the board but later moved to trade moderately higher; better performing sectors include consumer discretionary and technology; while sectors trending to the downisde indlue energy and utilites; Sweden closed for holiday; Allegro to buy Mall Group; Solidum sells its stake in Sampo; Caixabank divests stake in Erste; focus on release of NFP later in the session; earnings expected during the upcoming US session include Groupon, Fluor, Sempra and Gannett.

Equities

• Consumer discretionary: International Consolidated Airlines [IAG.UK] -1.5% (earnings), Casino Guichard-Perrachon [CO.FR] -1.5% (earnings).
• Industrials: Krones [KRN.DE] +6% (earnings), Airbus [AIR.FR] -1% (monthly deliveries), Leonardo-Finmeccanica [LDO.IT] -2% (earnings).
• Materials: Rheinmetall [RHM.DE] +2% (earnings).

Speakers

• BOE Gov Bailey reiterated view that interest rates would need to rise at some point but was not going back to period of having 4.0-5.0% rates.
• ECB’s De Guindos (Spain) reiterated ECB council stance that factors behind recent surge in inflation were transitory. Reiterates Council view that inflation in EU to decline in 2022 but as much as expected due to second-round effects. ECB was very attentive to 2nd round effects. Factors behind inflation’s surge was also having an impact on economic activity.
• ECB’s Makhlouf (Ireland) stated that was comfortable with ECB’s stance at this time. Needed to be vigilant on inflation and was prepared to take earlier action if necessary.
• ECB’s Stournaras (Greece) reiterated ECB view that inflation rise was temporary.
• Poland Central Bank (NBP) Gov Glapinski stated that everything indicated no need for more rate hikes.
• Poland MPC Member Ancyparowicz stated that to hike more with inflation above forecast. NBP might need to continue with its tightening and must hike rates if CPI worsened.
• Poland Central Bank Gatnar stated that NBP should stay on course to normalize policy and that the next few rate hikes should curb inflation. CPI could hit 9.0% in 2022.

Currencies/Fixed Income

• Recent push back on inflation concerns and market pricing of potential interest rates hikes by various EU central bankers had triggered a sort of re-pricing back in the favor of the USD.
• EUR/USD hovered around the 1.1550 area as more ECB members talked down any possibility of a rate hike in 2022.
• GBP/USD was approaching the 1.3450 area for 1-month lows in the aftermath of the BOE rate decision to keep policy steady on Thursday. UK yields slump by most since Brexit vote after BoE dashes rate hike bets. Money markets were no longer pricing in the Bank Rate hitting 1.00% over the next year.

Economic data

• (SE) Sweden Sept Maklarstatistik Housing Prices Y/Y: 15% v 14% prior; Apartment Prices Y/Y: 7% v 8% prior.
• (DE) Germany Sept Industrial Production M/M: +1.0%e; Y/Y: -1.0% v +1.3%e.
• (UK) Oct Halifax House Price Index M/M: 0.9% v 1.7% prior; Y/Y: 8.1% v 7.4% prior.
• (DK) Denmark Sept Industrial Production M/M: -5.6 v +3.3% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 37.5K v 49.3K tons prior.
• (TH) Thailand end Oct Foreign Reserves: $246.1B v $245.3B prior.
• (FR) France Sept Industrial Production M/M: -1.3% v 0.0%e; Y/Y: 0.8% v 2.5%e.
• (FR) France Sept Manufacturing Production M/M: -1.4% v +0.5%e; Y/Y: 0.1% v 3.5%e.
• (FR) France Q3 Preliminary Wages Q/Q: 0.3% v 0.5%e; Private Sector Payrolls Q/Q: 0.5% v 0.6%e.
• (ES) Spain Sept Industrial Production M/M: 0.3% v 0.1%e; Y/Y: 1.2% v 1.5%e; Industrial Output NSA (unadj) Y/Y: 1.9% v 3.6% prior.
• (CH) Swiss Oct Foreign Currency Reserves (CHF): 923.0B v 939.2B prior.
• (AT) Austria Oct Wholesale Price Index M/M: 2.6% v 0.8% prior; Y/Y: 15.8% v 13.5% prior.
• (CZ) Czech Sept Retail Sales Y/Y: 0.6% v 2.0%e; Retail Sales (ex-auto) Y/Y: 3.6% v 4.3%e.
• (HU) Hungary Sept Retail Sales Y/Y: 5.8% v 3.3%e.
• (HU) Hungary Sept Industrial Production M/M: -0.3% v -2.9% prior; Y/Y: -1.7% v -0.2%e.
• (TW) Taiwan Oct CPI Y/Y: 2.6% v 2.6%e; CPI Core Y/Y: 1.4% v 1.5%e; WPI Y/Y: 14.8% v 12.0% prior.
• (TH) Thailand Oct CPI M/M: 0.7% v 0.4%e; Y/Y: 2.4% v 1.9%e; CPI Core Y/Y: 0.2% v 0.3%e.
• (TW) Taiwan Oct Foreign Reserves: $546.7B v $544.9B prior.
• (DE) Germany Oct Construction PMI: 47.7 v 47.1 prior.
• (SE) Sweden Oct Budget Balance (SEK): 3.3B v 11.5B prior.
• (IT) Italy Sept Retail Sales M/M: 0.8% v 0.2%e; Y/Y: 5.3% v 2.2% prior.

Fixed income Issuance

• None seen.

Looking Ahead

• EU’s Sefcovic and UK Brexit Min Frost to meet in Brussels on Northern Ireland Protocol.
• (MX) Citibanamex Survey of Economists.
• 06:00 (EU) Euro Zone Sept Retail Sales M/M: 0.2%e v 0.3% prior; Y/Y: 1.5%e v 0.0% prior.
• 06:00 (EU) Daily Euribor Fixing.
• 06:00 (FR) France Debt Agency (AFT) announcements on upcoming issuance.
• 06:25 (EU) Daily ECB Liquidity Stats.
• 06:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2046 and 2050 Bonds.
• 07:00 (IE) Ireland Oct Live Register Monthly Change: No est v -5.3K prior; Live Register Level: No est v 165.0K prior.
• 07:00 (IT) ECB’s Panetti (Italy).
• 07:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).
• 07:00 (IN) India announces upcoming bill issuance (held on Wed).
• 07:30 (IN) India Weekly Forex Reserve w/e Oct 29th: No est v $640.1B prior.
• 07:45 (US) Daily Libor Fixing.
• 08:00 (CL) Chile Sept Nominal Wage M/M: No est v 0.1% prior; Y/Y: No est v 6.4% prior.
• 08:00 (MX) Mexico Oct Consumer Confidence: 44.1e v 43.4 prior.
• 08:00 (PT) ECB’s Centeno (Portugal) with Portugal Fin Min Leao.
• 08:30 (US) Oct Change in Nonfarm Payrolls: +450Ke v +194K prior; Change in Private Payrolls: +415Ke v +317K prior; Change in Manufacturing Payrolls: +30Ke v +26K prior.
• 08:30 (US) Oct Unemployment Rate: 4.7%e v 4.8% prior; Underemployment Rate: No est v 8.5% prior; Labor Force Participation: 61.8%e v 61.6% prior.
• 08:30 (US) Oct Average Hourly Earnings M/M: 0.4%e v 0.6% prior; Y/Y: 4.9%e v 4.6% prior; Average Weekly Hours: 34.8e v 34.8 prior.
• 08:30 (CA) Canada Oct Net Change in Employment: +41.6Ke v +157.1K prior; Unemployment Rate: 6.8%e v 6.9% prior; Full Time Employment Change: No est v +193.6K prior; Part Time Employment Change : No est v -36.5K prior; Participation Rate: 65.4%e v 65.5% prior ; Hourly Wage Rate Y/Y: 2.1%e v 1.7% prior.
• 08:30 (IS) Iceland to sell 2024 and 2028 RIKB Bonds.
• 09:00 (PL) Poland Oct Official Reserves: No est v $167.0B prior.
• 09:00 (PL) Poland Central Bank Nov Minutes.
• 09:00 (UK) Daily Baltic Dry Bulk Index.
• 10:00 (CA) Canada Oct Ivey Purchasing Managers Index (seasonally adj): No est v 70.4 prior; PMI (unadj): No est v 64.5 prior.
• 10:30 (TR) Turkey Oct Cash Budget Balance (TRY): No est v -32.9B prior.
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Denmark).
• 13:00 (US) Weekly Baker Hughes Rig Count.
• 15:00 (US) Sept Consumer Credit: $16.0Be v $14.4B prior.
• 20:00 (CO) Colombia Oct CPI M/M: 0.2%e v 0.4% prior; Y/Y: 4.8%e v 4.5% prior.
• 20:00 (CO) Colombia Oct CPI Core M/M: No est v 0.3% prior; Y/Y: No est v 3.0% prior.

Weekend data

• (CN) China Oct Foreign Reserves: $3.202Te v $3.201T prior.
• (CN) China Oct Trade Balance (CNY-denominated): 387.0Be v 433.2B prior; Exports Y/Y: 14.9%e v 19.9% prior; Imports Y/Y: 20.2%e v 10.1% prior.
• (CN) China Oct Trade Balance $64.0Be v $66.8B prior; Exports Y/Y: 22.45e v 28.1% prior; Imports Y/Y: 26.0%e v 17.6% prior.