1. Themes for the Week
– Attacks on Paris & the Euro: we already know the market is heavily short EUR and it doesn’t take much to trigger a short squeeze. Of course, any short squeeze will be an opportunity to short at better levels, but the attacks in Paris do not reduce the possibility of further ECB action. The attacks might actually stimulate further need for accomodation and hence be a Euro negative.
– US data to support December “liftoff”. Beyond the all important CPI, we have industrial production (Tue), the Empire survey (Mon) and the Philly Fed survey (Thu), which are expected to show some improvement. We also have speeches by several Fed members, which will be worth some attention.
– Commodity prices continue to remain weak, however the Paris episode can trigger risk-off flows on the open and send gold, silver, Jpys and Chf higher.
– UK CPI inflation still negative and slow to return to target. This will inevitably keep the BoE on hold.
– RBA minutes (Tue). The recent strength in the Australian labour market figures give less excuses to cut rates this year. The only excuses left are the weak global commodity prices.
– The Bank of Japan (Thu) is expected to keep policy unchanged. Focus will be on Governor
Kuroda’s press conference for clues about the possibility of additional stimulus.
2. Charts in line with these themes