* Risk-off mood prevails, Euro among worst fallers in G10 as France considers 4-week lockdown, president Macron to make announcement later today; Germany mulls closing hospitality sector for one month; Euro Stoxx futures -1.9%
*China: USD/CNY forecast revised down from 6.90 to 6.80 for 4Q-20, from 6.93 to 6.83 for 1Q-21, from 6.95 to 6.85 for 2Q-21 and from 6.97 to 6.87 in 3Q-21; banks halt use of counter-cyclical factor in calculating daily fixing, offers scope to guide yuan weaker in spot market
* Australia 3Q CPI rebounds from -0.3% to 0.75 yoy, RBA’s Harper says can purchase more AGBs at different points of yield curve; negative interest rate “extraordinarily unlikely”
* Day ahead: Bank of Canada and Brazil CB forecast to keep policy rates on hold, S. Africa budget update
* Nikkei -0.3%, EUR 10y IRS -1.5bp at -0.29%, Brent crude -2.2% at $40.3/b, Gold -0.12% at $1,906/oz
USD/CNY forecast revised down
concerns over rising COVID-19 cases on both sides of the Atlantic. France’s
President Emmanuel Macron is due to address the nation later today and is said to
be considering a month-long “flexible” lockdown which would allow for more
freedoms than the first national lockdown. German Chancellor Angela Merkel is also
said to be preparing tighter measures that will close all restaurants and bars and limit
contacts to only two households for the next month (Bloomberg). Meanwhile,
according the UK’s Telegraph, UK PM Boris Johnson is under pressure to announce
a new national lockdown amid rising cases that may be a more deadly wave. The US
reported 75k new cases yesterday, according to Johns Hopkins data
Oil price gyrations continue to play a dominant role in COP. Yesterday we saw better outflows from Real Money and again from corporates.European assets led the sell off overnight, succumbing to second lockdown concerns. Of course this provides a distraction away from the US election, but it feels like markets are unfortunately stuck between a rock and a hard place.
As we flagged, EUR assets were likely to remain resilient to Covid-19 negative newsflow, provided none of the major economies would consider full lockdown. Reports that France is considering a nationwide lockdown proved this theory true, with other countries also running out of options. As a consequence, risk aversion reigns markets with the usual suspects underperforming. MXN, NOK, TRY, ZAR all rank last while EURUSD trades around 1.1750.
Idiosyncratic stories have limited hold therefore – AUD Q3 CPI was ignored, and we expect the BoC to provide limited event risk for CAD. For ZAR, the budget announcement may provide some disappointment while central bank debates remain live for TRY and BRL.
Las divisas de LatAm se diferencian conforme el sentimiento por el riesgo global consolida
El sentimiento por el riesgo global no ha podido avanzar en los últimos días debido a que muchos inversores se
han mostrado reticentes a incrementar su exposición a activos de riesgo. Aunque esta dinámica podría no generar
aún una ronda importante de ventas generalizadas, muchas divisas de LatAm han tendido a mostrar dificultades
en entornos similares. En una semana en la que la agenda económica y política se presenta tranquila a nivel local,
muchas divisas del bloque podrían mostrarse sensibles al sentimiento externo. El contexto de riesgo del martes
volvió a generar diferenciación entre las divisas de LatAm, poniendo de manifiesto la vulnerabilidad de algunas de
ellas. Aunque seguimos favoreciendo al bloque como clase de activos, no debemos descartar volatilidad adicional
conforme aumenta la incertidumbre en relación con los próximos eventos.