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In focus today

In Denmark, October inflation data is due, with energy and food prices expected to drive up inflation to 1.7% y/y from 1.3% y/y in September.

Similarly, Norway's October inflation figures are released today. We forecast core inflation to have eased to 2.6% y/y, with a slight risk to the upside. We do not expect a reading below Norges Bank's estimate to trigger a rate cut in December.

While last week saw many significant market events, this week's schedule is lighter. On Tuesday, the German ZEW for November will be released, and the key event - U.S. October inflation data - is set for Wednesday. On Friday, the European Commission is set to publish its new economic forecasts, while US retail sales and industrial production data is also due for release. During the week, we receive Chinese credit data, but no specific date has been set. The figures could give an early indication of the effect of the stimulus.

Economic and market news

What happened since Friday

In the US, the University of Michigan's flash consumer sentiment survey for November hit a seven-month peak, rising to 73.0 from 70.5, with the expectations index reaching a 3.5-year high, up nearly 6% to 78.5. Consumers are now less concerned about near-term inflation, with 1y expectations dropping to 2.6% from 2.7%, while 5y expectations edged up to 3.1% from 3.0%.

Turning to politics, Republicans are close to securing control of the House with 214 seats confirmed, needing four more seats to keep a majority, and underscoring that the Republican party is close to sweeping the Congress. A Republican sweep would pave the way for Trump's political agenda, likely implying fiscal policies that could increase the budget deficit, public debt and ultimately inflationary pressures. With Arizona also counted, President-elect Trump won all swing states.

In China, the fiscal policy announcement on Friday fell short of expectations, offering no specific stimulus figures beyond a pledge to be "forceful." That said, there was an announcement of a CNY 6tn local government debt swap program which should ease the situation for local governments and make them able to support the economy more. All in all, it remains unclear to what extent policies will be able to turn the situation around for Chinese growth. Moreover, Chinese October inflation data came in lower than expected at 0.3% y/y and -0.3% m/m (cons: 0.4% y/y, -0.1% m/m).

In Germany, incumbent Chancellor Scholz stated on Sunday he is willing to call a vote of confidence before Christmas, moving up his initial proposal of January 15 amid rising political and public pressure.

In crypto space, Bitcoin surpassed USD 80,000 for the first time on Sunday following Trump's sweep of all swing states and expectations of a more pro-crypto administration. At the time of writing, Bitcoin is hovering around USD 81,600.

Equities: Global equities ended higher on Friday and concluded the week on a positive note, with considerable attention focused on the US election, alongside some notable sector and regional differences. However, observing the sector performance on Friday and regional performance this morning, one can discern a China-effect on the markets. Post-cash close on Friday, Beijing released details on both the local government debt swap programme and additional stimulus measures. However, especially the stimulus part surprised on the downside, resulting in the underperformance of the materials sector and Chinese equities this morning.

Aside from the China effect, defensives were seen outperforming cyclicals on Friday. We do not believe this marks the beginning of a trend where defensives will consistently outperform following the election, but rather it should be viewed in the context of the substantial outperformance of cyclicals over the last three months. Cyclicals have risen by 15%, while defensives have increased by 1.3% in the last three months. In the US on Friday, the Dow closed up by 0.6%, the S&P 500 by 0.4%, Nasdaq by 0.1%, and the Russell 2000 by 0.7%.

Asian markets are lower this morning, led by Chinese H-shares. Futures in Europe and the US are higher.

FI: Friday was another action-packed trading session in fixed income markets. Long-end EUR rates reversed the bulk of the increases seen on Thursday as the Chinese fiscal announcement on Friday was disappointingly unclear. The Bund ASW-spread turned positive, closing at 1.6bp, as Chancellor Scholz said he is open for discussing a timing of early elections already in January. New polling suggests that 2/3 of German voters want the election as early as possible. 10Y US Treasury yields fell a couple of basis points throughout an uneventful US session. But as the majority will likely be razor-thin, markets should continue to trade the 'Republican light sweep' narrative.

FX: The eventful past week ended with broad USD strength across the G10 space. EUR/USD declined to the lower end of the 1.07-1.08 range. The JPY gained momentum in the latter half of last week, pushing USD/JPY below 153 as the likelihood of a December BoJ hike gained traction, with 11bp now priced in, up from 8bp a week ago. EUR/GBP drifted below 0.83. The Scandies traded heavily on Friday, with EUR/NOK around 11.80 and EUR/SEK at 11.60.

Daily Pivots: (S1) 196.32; (P) 197.62; (R1) 198.50; More...

Intraday bias in GBP/JPY remains neutral and more consolidations could be seen below 199.79. Further rally is expected as long as 55 D EMA (now at 194.99) holds. Above 199.79 will resume the rebound from 180.00 to retest 208.09 high. However, sustained break of 55 D EMA will argue that the corrective rise has completed already, and turn near term outlook bearish for 180.00/183.70 support zone.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 162.73; (P) 164.07; (R1) 164.94; More....

Intraday bias in EUR/JPY stays on the downside at this point. Fall from 166.67 short term topic could extend lower. Sustained trading below 55 D EMA (now at 163.31) will argue that whole corrective rise from 154.40 has completed with three waves up to 166.67. Deeper decline should then be seen back to 154.40/155.14 support zone. On the upside, break of 166.67 will target 61.8% retracement of 175.41 to 154.40 at 167.38 instead.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8283; (P) 0.8305; (R1) 0.8317; More...

Intraday bias in EUR/GBP remains on the downside as larger down trend is resuming. Next near term target is 61.8% projection of 0.8624 to 0.8294 from 0.8446 at 0.8242. Break there will target 0.8201 key support. On the upside, above 0.8339 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 0.8446 resistance holds, in case of rebound.

In the bigger picture, down trend from 0.9267 (2022 high) is in progress. Next target is 0.8201 (2022 low), but strong support should be seen there to bring rebound. However, outlook will remain bearish as long as 0.8624 resistance holds even in case of strong rebound. Decisive break of 0.8201 will indicate long term bearish reversal.

Daily Pivots: (S1) 1.6198; (P) 1.6252; (R1) 1.6336; More...

Intraday bias in EUR/AUD Remains neutral for the moment. For now, risk will stay mildly on the downside as long as 1.6598 holds, in case of stronger rebound. On the downside, break of 1.6161 will resume the decline from 1.6590 to target a test on 1.5996/6002 key support zone.

In the bigger picture, as long as 1.5996 cluster support , up trend from 1.4281 (2022 low) is still expected to resume through 1.7180 at a later stage. However decisive break of 1.5996 will argue that the medium term trend might have reversed. Deeper fall would be seen to 61.8% retracement of 1.4281 (2022 low) to 1.7180 at 1.5388, even as a correction.

Daily Pivots: (S1) 0.9360; (P) 0.9393; (R1) 0.9420; More....

Intraday bias in EUR/CHF remains neutral as it's staying inside converging triangle. On the downside, break of 0.9331 will target 0.9305 support first. Firm break there will bring retest of 0.9209 low. On the upside, break of 0.9444 will bring stronger rally to 0.9506 resistance next.

In the bigger picture, fall from 0.9928 is seen as part of the long term down trend. Repeated rejection by 55 D EMA (now at 0.9419) keeps outlook bearish for breaking through 0.9209 low at a later stage. Nevertheless, sustained trading above 55 D EMA will confirm medium term bottoming at 0.9209 and bring stronger rebound back towards 0.9928 key resistance.

SNB Vice President Antoine Martin conveyed a cautious stance on future monetary policy in an interview with Le Temps.

While SNB indicated at its September meeting the readiness to cut interest rates further, Martin stressed that "it's not useful for central banks to lock themselves into forward-looking communications."

He highlighted that "between now and the next decision, there may be changes in conditions that render current communications invalid," This approach means SNB has made "absolutely no commitment" to a specific policy path.

Addressing the performance of Swiss Franc, Martin noted that its development this year has been "neither particularly surprising nor exceptionally problematic."

He explained that due to the inflation differential between Switzerland and other countries, SNB expects Swiss Franc to "appreciate structurally over time in nominal terms."

However, he pointed out that "in real terms, excluding the inflation effect, the appreciation has been limited."

Daily Pivots: (S1) 1.3868; (P) 1.3898; (R1) 1.3939; More...

Range trading continues in USD/CAD below 1.3958 and intraday bias remains neutral. Further rally is expected as long as 1.3822 support holds. On the upside, decisive break of 1.3976 key resistance will confirm larger up trend resumption. On the downside break of 1.3822 support will bring deeper pullback towards 55 D EMA (now at 1.3748).

In the bigger picture, sideway consolidation pattern from 1.3976 (2022 high) might still extend further. While another decline cannot be ruled out, strong support should emerge above 1.2947 resistance turned support to bring rebound. Rise from 1.2005 (2021 low) is still in favor to resume at a later stage. Decisive break of 1.3976 will target 61.8% projection of 1.2401 to 1.3976 from 1.3418 at 1.4391.

Daily Pivots: (S1) 0.6533; (P) 0.6608; (R1) 0.6657; More...

Intraday bias in AUD/USD remains neutral for the moment. For now, further rise is mildly in favor as long as 0.6551 short term bottom holds. Above 0.6687 will target 61.8% retracement of 0.6941 to 0.6511 at 0.6777. On the downside, break of 0.6511 will resume the fall from 0.6941 instead.

In the bigger picture, rise from 0.6269 (2023 low) should have completed with three waves up to 0.6941. Corrective pattern from 0.6169 (2022 low) is now extending with another falling leg. Deeper decline would be seen back to 0.6269 as sideway trading extends.

Daily Pivots: (S1) 1.0667; (P) 1.0738; (R1) 1.0788; More...

Intraday bias in EUR/USD remains neutral and more consolidations could be seen above 1.0681 temporary low. Outlook will stay bearish as long as 1.0936 resistance holds. Below 1.0681 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0760 from 1.0936 at 1.0656, and then 100% projection at 1.0483.

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage.