Citi
European Open
USD weakness was the predominant theme at the start of the week with the DXY trading 0.12% in the red. The weekend saw Senate Majority Leader Schumer urge Biden to authorize a sales from the emergency reserves to provide relief on gasoline prices. The Asia morning saw oil prices decline, with Brent trading 0.82% in the red at 81.50 and WTI trading 0.73% in the red at 80.21. JPY saw Q3 GDP miss, printing -3.0% on an annualized basis (vs -0.7% consensus), although JPY was little changed. Chinese Retail sales YoY printed at 4.9% (vs 3.7% consensus), and IP YoY printed at 3.5% (vs 3.0% consensus), as China seemed to shake off a little of the slowdown concerns. However, markets looked past the print to trade more on the USD weakness.
Looking ahead, the Biden-Xi call early on Tuesday (0045 GMT) remains top of mind. Today, we note Eurozone Trade Balance SA at 10:00 GMT, SEK: CPIF YoY at 08:30 GMT and BoE's Haskel’s (dovish) speech at 09:30 GMT. On the EM front, we see PEN economic activity (time unknown). We also flag holidays in BRL, COP and MXN today.
An eye on the US
USD saw a dip in the Asian morning, with DXY dropping 0.12% as the G10 complex mainly traded around the USD weakness. Treasuries firmed gently during Asia hours, with lower yields adding some light USD. Our Tokyo desks saw only light flows with volumes in note futures running ~70% of normal and only USD1.2bn in 10y trading as of 6am London.
Gold higher: Both Gold and Silver have broken out and look to be getting momentum from the rising “inflation focus”. A replication of the 2011-2012 picture would suggest a rally towards $1,917 before the move loses steam. However the present dynamic with inflation is materially different to then and may, I suspect, help Gold rally further. If it can overcome that $1,917 area then an extended gain on the back of a completed double bottom picture could suggest a move as high as $2,100 in the coming months.
JPY saw Q3 GDP miss, printing -3.0% on an annualized basis (vs -0.7% consensus). However, CitiFX Strategist Osamu Takashima-san notes that given the higher vaccination and economic reopening that is ongoing, we could see a strong rebound in Q4.
CNH China retail sales and IP data beat expectations today. Retail sales YoY printed at 4.9% (vs 3.7% consensus), and IP YoY printed at 3.5% (vs 3.0% consensus). Retail sales came in surprisingly high, beating the highest surveyed economic forecast on Bloomberg (4.8%). The Chinese economy seems to be shaking off the slowdown concerns in October with the higher than expected prints.
–USDCNH moved little on the news, trading 0.04% in the red, although this seems driven more by dollar weakness in the Asian morning.
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