In our Investment Bank Outlook each week, we bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation.
It’s a pleasant start to the new week, with anticipation about the US/China phase one trade deal signing on Wednesday lifting equities and allowing USDCNH to test 6.90. However, the bank holiday in Japan meant that our E-trading desk saw just 25% of usual volumes interbank on USDJPY comparing with the 30 -average. Naturally, USDCNH was the stand-out pair at over 2.3 times the average interbank volumes on the breach of 6.90.
Aside from the US-China trade deal, there are other things to warrant focus.
TWD say a majority for incumbent President Tsai Ing-wen, while our AUD economist has estimated the economic impact of the recent bushfires. Our latest G10 & EM Week Ahead: Much to consider outlines all the risk events in the coming days. This morning, sight deposits data for CHF will be more interesting than GBP trade/IP releases. However more dovish BoE comments over the weekend suggests that the January meeting remains potentially live.
RBC Capital Markets
In the absence of any significant news flow over the weekend, and with Japan closed, markets have defaulted to small risk‐on moves overnight, USD/JPY holding around last week’s high (109.64) and AUD continuing to reverse last week’s losses (0.6917). GBP is underperforming moderately after MPC member Vlieghe said he would vote for a rate cut if there was no sign of a rebound in activity after the election. Today’s data (for November) will shed no light on that and the key releases are the flash PMIs (Jan 24) ahead of the next MPC meeting (Jan 30). There is current a 40% chance of a rate cut discounted for that meeting.
Week ahead: Phase one of the US‐China trade deal is due to be signed in Washington on Wednesday. There are no G10 central banks announcements this week, but a small minority expect a rate cut from the SARB and there is a very wide spread of expectations for CBRT (both Thursday). The Q4 earnings season gets underway in the US tomorrow, with a number of important financials announcing.
December retail sales (Friday) and CPI (tomorrow) are the key releases in the US and our economists expect former to show the consumer continuing to motor along on the back of strong wages and resilient confidence. Slow vehicle sales may hold back the headline number, however. In Canada, after today’s important Business Outlook Survey (see CAD), the rest of the week is quiet, as it is in most of the rest of G10, with the exception of the UK (GBP).
CAD: BOS arrives at its usual time just over a week before the next BoC meeting and MPR on January 22. Activity data (for October) softened into year‐end and we are tracking Q4 GDP growth at less than 1% annualized, materially below trend and the BoC’s 1.3% projection from October. Positive signs on US‐China trade and USMCA provide additional context, though these firmed up after the likely survey period. The last BOS was relatively solid, including the balance of opinions on future sales (+23%) and investment intentions (+28%), and elevated capacity pressures. Note that a new BoC survey – the Canadian Survey of Consumer Expectations (CSCE) – will be released for the first time alongside. It should cover inflation expectations, the labour market and household finances.
GBP: Having passed in the Commons last week, the Brexit bill goes to the Lords today and should pass, despite a majority being against Brexit. If any amendments are added, the government can remove them when the bill comes back to the Commons. Today brings the monthly activity indicators for November and attention will focus mainly on the overall GDP estimate. The October GDP data showed the UK economy getting Q4 off to a very slow start. This month the main drag on activity should come from the manufacturing sector where a number of large car manufacturers pressed ahead with plans to shut‐down production to coincide with the UK’s expected exit from the EU at the end of October. With GDP growth at a standstill again in November that should drag the 3m/3m rate down to ‐0.1%. Overall CPI inflation (Wednesday) is expected to hold at 1.5% y/y for the third straight month.
AUD: Australian November housing finance approvals (Thursday) are the only significant data in AU/NZ this week and are expected to be consistent with the ongoing recovery in both turnover and prices.
JPY: Overall Japanese capital flows were quite neutral in November (based on the weekly data). Tonight’s detailed data will show whether recent trends of selling Europe and buying the US continued in the month.
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