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.

Morgan Stanley

USD Fiscal Abroad, Weaker Data BearishWatch: NFP, UMich Survey, CPI, FOMC Rates Decision, PPI, Retail SalesUS data have taken a turn for the worse – ISMs disappointed, ADP showed poor labor gains, and construction spending declined and was revised downward. The Bloomberg Dollar index fell below a recent low at 1200, and may retest lows below 1195. An eventual US-China trade deal should provide a measure of policy certainty that would bolster investor confidence in global growth, weakening USD broadly. Fiscal policymakers (like those in Australia, New Zealand, Germany, and Japan) taking the reins from monetary policymakers (who sound more reluctant to cut) may add to downside USD momentum.

EUR More Potential for Fiscal Spending NeutralWatch: German ZEW Survey, IP, ECB Rates DecisionEUR may grind higher against USD but stay weak on the crosses. The change in Germany's SPD leadership indicates that Germany could be on a path away from fiscal prudence, which is medium-term EUR-positive. Our base case scenario for a Conservative majority in the UK elections would also allow GBP to rally, spilling over into a higher EURUSD too. The EMU November PMIs support our view that EMU growth may be bottoming, but the rebound may only set in more materially in 1Q20, suggesting EUR may continue to be used as a funding currency for carry trades for now. 1.12 is the key resistance level to break for EURUSD to open room for more upside potential.

JPY Rangebound for Now NeutralWatch: GDP, BoP, M3, Machine Orders, Tankan Survey, IPJPY risks look evenly balanced – a substantial fiscal stimulus package should offset a drag on growth caused by the consumption tax hike, and fiscal stimulus could boost Japanese rates, putting downward pressure on USDJPY. USDJPY could also decline as market concerns about stretched US asset valuations and better market expectations for global growth drive outflows from the US. However, we expect the US and China to eventually sign a phase one trade deal, which would support investor confidence and flows out of Japan These effects would roughly offset each other in the near term, keeping USDJPY broadly rangebound between 109.90 and 106.50.

GBP Election Time BullishWatch: Election Polls, GDP, IP, Trade Balance, General ElectionsGBP has potential to see large moves in the coming week depending on the election results. Our economists see a Conservative majority government as the most likely outcome, which – if that occurs – should increase markets' perceived probability of the current Brexit deal passing parliament early next year. Higher chances of an orderly Brexit resolution would likely unleash business investment, increase foreign investment in cheap UK assets and allow no-deal Brexit hedges to be lifted, paving the way for GBP to rally sharply. Neutral GBP positioning also provides room for the currency to gain. Technically, GBPUSD has breached the 1.30 level and EURGBP has closed below 0.85, which may provide more GBP bullish momentum.

CHF Upside Risk for EURCHF BearishWatch: Sight Deposits, PPI, SNB Rates Decision, UK ElectionsRisk/reward favors EURCHF upside in the coming week. The SNB is likely to keep rates unchanged at the upcoming meeting, which should have limited impact on CHF, but risks are skewed to the dovish side given negative Swiss headline inflation. CHF will also be driven by the ECB policy decision, UK elections and the scheduled hike in US-China tariffs on December 15. We see the most likely outcome to be higher Bund yields,GBP and risk sentiment, which would allow EURCHF to rally. Meanwhile, the EURCHF downside should be limited as the SNB is likely to step up FX interventions if EURCHF nears 1.08, and may even potentially cut rates in the event of a bigger CHF appreciation.

J.P Morgan

EUR

Friday’s US jobs data was unquestionably very strong, even when adjusting for any GM strike-related bounce. This reading helped allay any immediate concerns around the strength in the US economy that earlier data readings in the week may have caused, though of course it did not erase those prints from existence. In any event this shift in sentiment was enough to send the euro below the 1.1065/70 area, which had held in well on a previous pullback attempt. This will be a very busy week in FX and global macro broadly, with numerous events scheduled, including (among others) an FOMC, an ECB, the ongoing US-China negotiations, and the UK election. The schedule for today is sparse, however. How the data plays out in Europe is likely to be the more meaningful story for this currency pair going forward, and, if anything, avoiding a sharp downturn in the US is a good thing for ROW data. Stay neutral to small core long for the time being with a plan to buy dips. 1.1030/40 and 1.0980/90 are the levels to watch below. The 1.1110/20 area is the first hurdle on the topside, followed by the more important 1.1170/80 zone.

GBP

We enter into the final few days of campaigning with recent polls indicating a healthy conservative lead of 14%. The pound has so far rallied over 2% this December and we open this morning with cable making fresh monthly highs. At this point I would normally be doubtful of further gains, however we continue to see client demand for pounds and price action remains compelling. The dollar also remains weak despite the impressive Friday NFP report, and the next level to the topside in cable is 1.3185/1.3215. In EURGBP we sit at support around 0.8380/0.8400, with resistance at 0.8500.

JPY

Very hansom NFP number out of the US on Friday sent USD bears packing initially, although the lack of extension in fixed income tempered the scale of correction and stocks were the major beneficiary. This is why it was quite surprising to see USDJPY pretty much unchanged on the day (leaving cross yen much lower). We saw nothing to explain this move, indeed we mainly saw HF (USDJPY) short covering after the number, and we have seen local demand interest overnight. Having covered our shorts on the data, price action is arguing for reinstatement although there are a few areas of support looming, so will watch how it unfolds from the sidelines for now. Nothing on the calendar today. First support at 108.45 with 108.20/25 below while 108.90/00 is resistance with 109.30/35 above.

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