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Dollar recovers broadly today as it's digesting recent losses. Also there is some support from OECD report that projects acceleration in US growth next year. Focus will turn to Fed chair nominee Jerome Powell's confirmation hearing. But Powell is generally seen as a safe choice for the job and shouldn't give us surprises. While the greenback recovers, momentum remains unconvincing as trader stays cautious ahead of Senate vote on tax bill later in the week. Elsewhere, Aussie and Kiwi are both trading as the strongest one today while Sterling is back under broad based pressure.

Powell expects interest rates to rise and balance sheet to shrink

Fed chair nominee Jerome Powell released a statement to the Senate Banking Committee before his confirmation hearing today. Powell said in the statement that Fed policy makers "expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink." Adding to that, he emphasized "while we endeavour to make the path of policy as predictable as possible, the future cannot be known with certainty." So far, Powell sounded like he would like maintain continuity from the Yellen era. But we may read deeper into his mind in the Q&A session today.

OECD projects Eurozone, Japan, UK, China growth to slow in 2018, US in 2019

The Organization for Economic Cooperation and Development published its semi-annual economic outlook report today. OECD projects further acceleration in global growth in 2018, but could slow in 2019. Global economy is forecast to grow 3.6% in 2017, accelerate to 3.7% in 2018, then slow to 3.6% in 2019. But it warned that "evidence continues to build that financial asset prices are inconsistent with expectations for future growth and the policy stance, exacerbating the risks of financial corrections and growth downdrafts." That suggests investors are being too optimistic.

US is projected to grow 2.2% in 2017, accelerates to 2.5% in 2018 and then slow sharply to 2.1% in 2019. Fiscal and business spending could boost wages and then prompt inflation and more Fed tightening. OECD noted that "risks to the outlook remain sizable". In particular "elevated leverage ratios in the corporate sector need careful monitoring and action to ensure that these risks are contained."

Eurozone growth is expected to peak at 2.4% in 2017, then slow to 2.1% in 2018 and 1.9% in 2019. OECD cautioned that ECB tightening too quickly could "weigh on the recovery in countries with high unemployment and large output gaps". Also, while OECD projected inflation to pick up to 1.7% by 2019, it would remain well below ECB's target of at or slightly below 2%.

Japan growth is also projected to peak in 2017 at 1.5%, then slow to 1.2% in 2018 and then 1.0% in 2019. The organization urged that "a rethinking of the monetary policy strategy would, however, be needed if the inflation target is not met for a prolonged time." Also, it criticized that "the BOJ becomes an even more predominant holder and buyer of government bonds and financial intermediation and stability become compromised."

UK Growth is projected to slow to 1.5% in 2017 and continued the downward path, to 1.2% in 2018, then 1.1% in 2019. The growth slowdown would be due to "continuing uncertainty over the outcome of negotiations around the decision to leave the European Union and the impact of higher inflation on household purchasing power." Nonetheless, "the upward revision of 0.2 percentage points for 2018 in part reflects the slower pace of fiscal consolidation announced in the Budget, and also partly reflects our revised technical assumption on the exit from the EU."

While China remains one of the global economic driver, growth is also to peak in 2017 at 6.8%, then moderate to 6.6% in 2018 and then 6.4% in 2019. Instead, India might suffer a blip with grow to slowing to 6.7% in 2017. India growth is projected to pick up pace again to 7.0% in 2018 and 7.4% in 2019. Brazil is expected to come out of contraction and grow 0.7% in 2017, accelerate to 1.9% in 2018 and then 2.3% in 2019.

BoE: UK banks could manage disorderly Brexit

BoE's latest stress test results show that "the U.K. banking system could continue to support the real economy through a disorderly Brexit." BoE Governor Mark Carney said in a press conference that "let's be clear, this is a big call … Because we will be here in March 2019 in the unlikely event that we end up in a situation without a transition deal or without an agreement. So we are putting our money where our mouth is." Meanwhile, five of the seven biggest banks tested passed the healthcheck Barclays Pls and Royal Bank of Scotland group fell below their systemic reference point. But actions were taken by both since 2016 year end and no further action is needed.

A Spanish candidate could fill ECB Vice next year

ECB Vice President Vitor Constancio will step down next year. It's reported that the position would probably go to a Spanish candidate. After Jose Manuel Gonzalez Paramo, Spain has not had an ECB Executive Board member since 2012. Spanish Economy Minister Luis de Guindos told newspaper El Economista that "I'm convinced that the position will go to Spain." Meanwhile, de Guindos rubbished the rumor that he will replace Jeroen Dijsselbloem as Eurogroup head.

BoJ Katakoa pushes for additional easing again

BoJ board member Goushi Katakoa was a new comer to the board, and the sole dissenter to last months' decision to stand pat. He called for more easing as "our near-term challenge is to think about how we can achieve our 2 percent inflation target, and whether current steps are enough." He added that "if the global economy is hit by a big shock, there's a risk things won't proceed as projected. Before that happens, we need to ensure we return to a position where have room to take policy action when needed." Also, "we need to avoid a situation where we're forced to continue current monetary policy as inflation fails to reach 2 percent, and gradually hurt Japan's financial system,"

Separately, BoJ Governor Haruhiko Kuroda said that a "reversal rate", the level where central bank rate cuts could hurt the economy, could help BoJ understand the appropriate yield curve shape. This comes in a time where policy makers are considering reform of monetary policies.

On the data front

US trade deficit widened to USD -68.3b in October. Wholesale inventories dropped -0.4% mom in October. Canada RMPI rose 3.8% mom in October while IPPI rose 1.0% mom. German Gfk consumer sentiment was unchanged at 10.7. Import price rose 0.6% mom in October. Eurozone M3 rose 5.0% yoy in October.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9788; (P) 0.9804; (R1) 0.9832; More....

Intraday bias in USD/CHF remains neutral as recovery from 0.9776 temporary low continues. As long as 0.9946 resistance holds, another fall is still expected. Below 0.9776 will extend the decline from 1.0037 to 61.8% retracement of 0.9420 to 1.0037 at 0.9656. We'll look for bottoming again below 0.9656 and above 0.9420. On the upside, break of 0.9946 resistance will indicate that the decline from 1.0037 has completed and bring retest of this resistance.

In the bigger picture, range trading continues between 0.9420/1.0342. At this point, 0.9420 appears to be a strong support level. Therefore, in case of decline attempt, we don't expect a firm break of this level. Nonetheless, strong break of 1.0342 is also needed to confirm upside momentum. Otherwise, medium term outlook will stay neutral.

Economic Indicators Update

GMT	Ccy	Events	Actual	Forecast	Previous	Revised
07:00	EUR	German Import Price Index M/M Oct	0.60%	0.40%	0.90%
09:00	EUR	Eurozone M3 Money Supply Y/Y Oct	5.00%	5.10%	5.10%	5.20%
12:00	EUR	German GfK Consumer Confidence Dec	10.7	10.7	10.7
13:30	USD	Advance Goods Trade Balance Oct	-68.3B	-65.0B	-64.1B
13:30	USD	Wholesale Inventories M/M Oct P	-0.40%	0.40%	0.30%	0.10%
13:30	CAD	Industrial Product Price M/M Oct	1.00%	0.50%	-0.30%
13:30	CAD	Raw Materials Price Index M/M Oct	3.80%	2.00%	-0.10%	-0.20%
14:00	USD	House Price Index M/M Sep		0.50%	0.70%
14:00	USD	S&P/Case-Shiller Composite-20 Y/Y Sep		6.00%	5.92%
15:00	USD	Consumer Confidence Index Nov		124	125.9

The Canadian dollar has posted slight gains in the Tuesday session. Currently, USD/CAD is trading at 1.2794, up 0.19% on the day. On the release front, Canada releases two inflation reports, and BoC Governor Stephen Poloz holds a press conference about the Financial System Review. The US will release CB Consumer Confidence, with an estimate of 123.9 points. Fed Chair Designate Jerome Powell will testify at his confirmation hearing before the Senate Banking Committee. On Wednesday, the US publishes Preliminary GDP and Pending Home Sales and Janet Yellen will testify before a congressional committee.

The spotlight is on Jerome Powell, who is replacing Janet Yellen at the helm of the Federal Reserve. Investors will learn a bit more about Powell, who testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Powell is widely expected to maintain Janet Yellen's cautious monetary stance, which has been marked by small, incremental rate hikes. Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a "gradually rising path" for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

The Canadian dollar remains under pressure, as oil prices have dipped lower. As well, weak retail sales reports for September missed their estimates and this continues to weigh on the currency. Core Retail Sales improved to 0.3%, but this was well off the forecast of 0.9%. Retail Sales came in at 0.1%, compared to an estimate of 0.9%. Investors will be keenly following the Bank of Canada, which releases its semi-annual Financial System Review.

The CAC has bounced back after starting the week with losses. In the Tuesday session, the CAC is at 5387.25 up 0.51% on the day. On the release front, there are no major eurozone events on the calendar. Later in the day, Fed Chair Designate Jerome Powell will testify at his confirmation hearing before the Senate Banking Committee. On Wednesday, France releases Consumer Spending and Preliminary GDP. The US will also publish Preliminary GDP and Janet Yellen will testify before a congressional committee.

European stock markets are in green territory on Tuesday, as German coalition talks have been revived, after collapsing last week. The SPD (socialist democrats), a junior partner in the last government, have agreed to hold coalition talks with Angela Merkel's CDU. The SPD is expected to demand a bigger role in a new government if it agrees to a "grand" coalition. Talks between the CDU, the Greens and the Free Democrats imploded when the Free Democrats bolted, saying there was not enough common ground to continue talks. Merkel is reluctant to run a weak minority government, and if talks with the SPD don't make progress, the likely result would be another election. For its part SPD lawmakers are split on whether to join up with the CDU, but Merkel may choose to make her former coalition partner an offer it can't refuse, such as the powerful finance ministry.

All eyes will be on Jerome Powell, who testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Will Powell be a clone of outgoing chair Janet Yellen? Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a "gradually rising path" for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

The U.S dollar is starting to recover upside momentum against the Japanese yen, as the U.S dollar index bounces from its recent trading lows. Despite the risk-off trading sentiment continuing through Asia the USDJPY pair is starting to attack the 111.34 resistance level once more. Traders now look to a key-note speech from incoming Federal Reserve Chair Jerome Powell, and U.S Consumer Confidence data for the month of November.

Should price action hold above the 111.34 technical level, intraday buyers may look to test the 111.72 level again, with a possible deeper retrace towards 112.20 level..

If USDJPY buyers fail to hold the 111.34 level again, a continuation of the down-move towards 110.90 and 110.60 seems most likely.

The British pound has fallen against the U.S dollar, hitting 1.3290, after BOE Governor Mark Carney warned of the possible shocks the UK economy faces after leaving the European Union. GBPUSD still remains below the key 1.3307 level, with price-action currently holding slightly above the 1.3300 level and hourly momentum pointing down. The pair is likely to remain volatile heading into the U.S trading session, as we see the release of high-impact data from the U.S economy, and a host of Federal Reserve members speaking.

The GBPUSD pair remains intraday bearish while trading below the key 1.3307 level. Further downside towards the 1.3268 level appears likely, with extended weekly support found at 1.3230.

Should price-action on the GBPUSD pair start to move back above 1.3307 technical level, buyers will likely push the pair towards the 1.3360 resistance level.

• Powell Testimony Eyed For Fed Direction Clues;
• UK Banks Pass Stress Tests But OECD Revises 2017 Growth Lower;
• Bitcoin Closes in on New Milestone as Frenzy Continues.

US equity markets are expected to open slightly higher on Tuesday following a flat and rather slow start to the week.

Federal Reserve Chair-designate Jerome Powell will testify on his nomination before the Senate Banking Committee on Tuesday and his comments will be monitored closely for clues on the direction he plans to take the central bank under his leadership. Based on the comments released overnight, it would appear Powell intends to send a message of continuity which means rate hikes will proceed, or intend to, as has been laid out already.

The regulatory component of his testimony may be of more interest though, with some seeing his appointment as a push towards looser regulation, something that has been a key feature of Trump’s first year in office and likely a big part of Powell’s nomination. In his prepared remarks Powell referenced a desire to consider ways of easing regulatory burdens although, likely in a bid to appease those concerned, he also stressed the need to preserve core reforms. I imagine he will be questioned heavily on these views. William Dudley and Patrick Harker will also appear today.

A rare piece of good news for the UK this morning as the Bank of England announced that all banks passed its stress tests for the first time since the financial crisis. While the tests didn’t test for Brexit scenarios specifically, they did suggest that banks are equipped to deal with a disorderly exit due to severity of the scenarios that were tested, which encompassed a range associated with it.

The OECD did add a small dose of negativity to the mix though, revising its growth forecast for the UK to 1.5% this year, down from 1.6%, although that was accompanied by a revision higher for 2018, to 1.2% from 1%. While the net revision may be positive, it’s hard to ignore the fact that this still means we’re headed for a period of slowing growth at a time when other countries prospects are looking much brighter, which was also reflected in the OECD’s latest forecasts.

The Bitcoin frenzy continues on Tuesday, with the cryptocurrency set to reach yet another milestone as it closes in on $10,000. While you can’t ignore the fundamental factors supporting the rise of Bitcoin – the latest being CME Group’s decision to launch Bitcoin futures – a 900% increase since the start of the year and the frenzy that’s formed around it does suggest there’s a large speculative force at play here.

While there’s no reason that can’t continue, nor anything to suggest it is overvalued in the long term, I do worry that it is vulnerable to further sharp and painful corrections, possibly more severe than anything we’ve seen since the start of the year. It will be very interesting to see how Bitcoin traders respond the closer we get to $10,000. Any severe corrections that may come in the future will also be a major test of speculators continued desire for such risk.

The DAX index has recorded slight gains in the Tuesday session. Currently, the DAX is at 13,042.50, up 0.33% on the day. On the release front, German GfK Consumer Climate is expected to edge up to 10.8 points. In the US, Fed Chair Designate Jerome Powell will testify at his confirmation hearing before the Senate Banking Committee. On Wednesday, Germany releases Preliminary CPI. The US will publish Preliminary GDP and Pending Home Sales and Janet Yellen will testify before a congressional committee.

Investors like they see from the German economy, and the DAX continues to trade at high levels. The euro and the stock markets remain steady, despite the political crisis in Germany. There are renewed hopes that another election can be avoided, as the SPD (socialist democrats) have reluctantly agreed to hold coalition talks with Angela Merkel’s CDU. The SPD was the junior partner in the previous government, and is expected to demand a bigger role in a new government if it agrees to a “grand” coalition. Talks between the CDU, the Greens and the Free Democrats imploded when the Free Democrats bolted, saying there was not enough common ground to continue talks. Merkel is reluctant to run a weak minority government, and if talks with the SPD don’t make progress, the likely result would be another election. For its part, SPD lawmakers are split on whether to join up with the CDU, but Merkel may choose to make her former coalition partner an offer it can’t refuse, such as the powerful finance minister.

The spotlight will be on Jerome Powell, who testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Powell is widely expected to maintain Janet Yellen’s cautious monetary stance, which has been marked by small, incremental rate hikes. Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

The Aussie dollar stands at the back foot on Tuesday following previous day’s strong upside rejection and repeated close below trendline resistance.

Fresh weakness is pressuring 10SMA support (0.7592) the lower boundary of near-term congestion between 10SMA and 20SMA), with increased downside risk expected on sustained break lower.

Bearish scenario look for hourly trough at 0.7555 (22 Nov low) and expose key support at 0.7530 (21 Nov multi-month low).

Alternative scenario needs firm break above 20SMA (0.7628) to neutralize downside risk.

Res: 0.7615, 0.7644, 0.7669, 0.7693
Sup: 0.7587, 0.7555, 0.7530, 0.7500

With most of the United States indulging in its own turkey vs cranberry sauce arbitrage into the Thanksgiving holiday, activity has been noisy but light on substance with a light data week globally.

Gold, silver and platinum continue to grind higher with gold failing at 1300.00 overnight. The question remains, is this a dollar-driven move as the U.S. yield curve flattens, or is this two month bottoming the start of a new trend? There is a definite lack of momentum in all three which suggests their fates remain tied to that of the dollar.

Palladium's chart maintains its long-term uptrend, but the shorter timescale suggests a welcome downside correction could be on the cards.

Copper broke it's descending triangle, tot he upside! price action remains constructive despite yesterdays pullback.

Natural gas falls from near the top of its multi-month range due to better than expected weather in the U.S. At the end of the day though, it's still in a range.

Brent and WTI Crude, in particular, see profit-taking ahead of the 30th November OPEC meeting. The charts suggest thought that the danger is still for deeper corrections to come although both are no longer overbought. Of the two, WTI looks more vulnerable as we head into oil's Thursday moment of truth.

The softs have diverged this week.

Sugar saw the best of it and continues to look constructive. It is testing the top of its six-month rage at 0.1500 with the 200-day moving average just behind that at 0.15100.

Soybean's chart is looking messy now, but as the dust settles prices are looking positive thanks to demand from China. As opposed to last week the beans look ready to test two month resistance.

Corn's week-long short squeeze was unwound in one day, and it is now marooned mid-range. Exports have been poor.

Wheat's global harvest weighs on prices as it tests support at 4.0340. We are still in a three-month range but long-term support looms at 3.9230.

Gold 00:00:00, Silver 00:03:05, Platinum 00:04:50, Palladium 00:07:00, Copper 00:08:50, Natural Gas 00:10:50, Brent Crude 00:12:10, WTI Oil 00:15:00, Sugar 00:16:10, Soybeans 00:17:55, Corn 00:20:00, Wheat 00:21:10

Notes/Observations

US Senate's vote on the tax reform (aimed for Thursday) said to be lacking support as 3 Republicans (Daines, Johnson and Corker) possibly voting ‘no. Trump is scheduled to address Senate Republicans today

BOE financial stability report raises countercyclical buffers (demands extra £6B from banks); session will also see BoC and the RBNZ release their financial stability reports

Euro Zone corporate lending growth at highest level since mid-2009

Korean exchanges were the first exchange to see the price of Bitcoin hit $10,000

Asia:

Japan PM Abe reiterated don't think necessary to make changes on accord with BoJ. Reiterated expects BoJ to continue easing policy.

BoJ Gov Kuroda reiterated global economy continues to recover. Did not see easy monetary policy hurting Japanese financial system so far; financial system has maintained stability

BOJ's Kataoka (dissenter): BoJ needed to take additional easing steps as inflation won't reach 2% around FY19. No need to think about exit strategy now, must focus on ways to hit inflation target

Europe:

Eurogroup Chief Dijsselbloem said to get a six month extension in position citing the difficult process of forming a German Govt

Portugal Parliament said to approve 2018 budget in final reading with budget deficit to GDP ratio set at 1.1% vs. 1.4% in 2017

Ireland Fianna Fail Justice spokesperson (opposition): unless deputy PM resigns, will force Ireland into new election

Ireland Foreign Min Coveney: we should wait under deputy PM tribunal evidence in Jan before making political judgment

Americas:

Fed Chair-designate Powell prepared congressional testimony expected interest rates to rise somewhat further from here; pledged to respond decisively to any new economic threats

Fed's Dudley (FOMC voter): Not particularly concerned that inflation was 'a little bit' below a Fed target; Reiterated we were gradually raising US interest rates; FOMC was 'very united' on appropriate policy path

Fed's Kashkari (dove, voter): Reiterated saw no reason to 'tap the breaks' on the economy, no reason to raise rates when inflation continued to run low

Fed's Kaplan (moderate, voter): backed rate hike in near future; remained mindful of Fed getting behind the curve

Senator Corker (R-TN): Could vote no on tax bill in committee if ‘trigger' not done. Wanted the tax bill to have 'trigger' to raise revenues if economic growth expectations were not met.

Aides to Sen Daines (R-MT): Senator is currently a no on tax bill; however is optimistic about changes

Energy:

Saudi Arabia Energy Minster Falih: No differences in OPEC on output pact extension; studies vary on time needed to balance oil stocks

Economic Data:

(DE) Germany Oct Import Price Index M/M: 0.6% v 0.4%e; Y/Y:2.6% v 2.5%e

(FI) Finland Oct House Price Index M/M: -0.5% v -0.3% prior; Y/Y: 0.4 v 1.6% prior

(TR) Turkey Nov Economic Confidence: 97.9 v 101.4 prior

(FR) France Nov Consumer Confidence: 102 v 101e

(ES) Spain Oct Adjusted Retail Sales Y/Y: -0.1% v +2.2%e; Retail Sales (unadj) Y/Y: -1.2% v +2.2% prior

(SE) Sweden Oct Retail Sales M/M: +0.1% v -0.1%e; Y/Y: 2.6% v 3.3%e

(SE) Sweden Oct Trade Balance (SEK): -3.1B v +3.2B prior

(EU) Euro Zone Oct M3 Money Supply Y/Y: 5.1% v 5.1%e

(IS) Iceland Nov CPI M/M: -0.2% v +0.5% prior; Y/Y: 1.7% v 1.9% prior

Fixed Income Issuance:

(ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2026, 2030, 2040 and 2044 bonds

(IT) Italy Debt Agency (Tesoro) sold €5.5B vs. €5.5B indicated in 6-month Bills; Avg Yield: -0.436% v -0.400% prior; Bid-to-cover: 1.86x v 1.99x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.4%% at 386.6, FTSE +0.5% at 7420, DAX +0.4% at 13054, CAC-40 +0.6% at 5389, IBEX-35 +0.6% at 10120, FTSE MIB +0.5% at 22289, SMI +0.6% at 9318, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

European Indices trade modestly higher across the board being led higher by Telcos and Autos. Earlier the OECD has lifted growth expectations for Germany, the Dax trades back above 13K.

Ocado outperforms after partnering with Casino in France on its Smart platform, while on the earnings front Topps Tiles, DataGroup trade higher, while Pets at Home trades sharply lower following results. Elsewhere Royal Dutch Shell lifted its FCF forecasts as well as announcing a strategic update. On the banking front UK banking names trade slightly lower despite passing the BoE stress test.

Looking ahead notable earners include Christopher Banks and ScotiaBank in Canada.

Equities

Consumer discretionary [Ocado [OCDO.UK] +19% , Casino [CO.FR] +2% (Partnership with Casino to develop Smart Platform), Scout 24 [G24.DE] -2.5% (share placement), Christian Hansen [CHR.DK] -3.4% (CEO to step down), Unilever [ULVR.UK] +0.8% (Investor day), Topps Tile [TPT.UK] +7% (Earnings)]

Technology: [Datagroup [D6H.DE] +2.9% (Earnings)]

Energy: [Royal Dutch Shell [RSDA.NL] +2.5% (Company strategy and financial outlook)]

Speakers

BOE Financial Stability review: No UK banks needed to raise capital following stress test; Raised countercyclical capital buffer to 1% by the end of 2018 from 0.5% to guard against economic shocks. Annual stress test of 7 UK banks revealed all of them could withstand a severe downturn in the domestic economy. Nationwide, Lloyds, Santander, Standard Chartered and HSBC passed the test outright; RBS and Barclays fell short on end-2016 data but had since boosted capital. Banks could keep lending even through a disorderly Brexit

BOE's Carney on Financial Stability review: Stress tests showed that banks could lend through an disorderly Brexit. Financial Policy Committee (FPC) was assessing the risks of a no-deal Brexit

ECB's Hansson (Estonia): ECB might end its asset purchase program in Sept 2018 given the ongoing solid economic developments

ECB called for consultations for input on high level features of a new unsecured overnight interest rate

UK Trade Sec Fox: Have gone far enough on Brexit talks to move onto issue of trade. Not afraid of not getting a Brexit agreement; could move to WTO

Spain Econ Min de Guindos: Catalan region economy contracted in Oct

OECD updated its economic outlook and noted that 2017 global growth would likely to be strongest since 2010. ECB should wait until 2020 to raise key interest rate

CzechCentral Bank Gov Rusnok: Would like to continue with normalizing policy. Domestic economy was growing fast and showing signs of over-heating

Russia Central Bank: Inflation expectations fell in Nov to 8.7%

Japan Cabinet Office (Govt) Monthly Economic Report for Nov maintained its overall economic assessment that economy was experiencing a moderate recovery

UAE Oil Min Mazrouei: OPEC to discuss extending production cuts by nine months until end of 2018. Vienna meeting 'wont be an easy meeting'; Hoping for another year of correction and recovery in oil market; Oil market recovery needs more time

OPEC members said back a 9-month extension of the current production cuts and is awaiting Russia's commitment

Currencies

USD was hovering near near a two-month lows as dealers awaited the confirmation hearing and first serious test for new Federal Reserve chair Jerome Powell. The USD was also facing headwinds from possible delays in the implementation of US tax cuts. Recent reports noted that Trump's tax plan could lacking support as 3 Republicans (Daines, Johnson and Corker).

GBP was softer in the session following the release of BoE financial stability report which reminded that a UK balance sheet was weak. BOE did noted that the largest banks would be able to withstand Britain crashing out of the EU. GBP/USD hovering around the 1.33 area and approx. 50 pips off its overnight highs

Fixed Income

Bund futures trade 163.25 up 8 ticks, as investors appear reluctant to go short with the persistent euro strength and global disinflation backdrop providing compelling arguments. Continued upside sees 163.40 then 163.63. A reversal targets 162.50 then 162.38.

Gilt futures trade at 125.39 up 11 ticks as markets await Brexit news. Continued upside eyeing 125.675 then 126.47. Downside targets include 124.90 then 124.24.

Tuesday's liquidity report showed Monday's excess liquidity remained steady at €1.850T. Use of the marginal lending facility fell to €315M from €420M prior.

Looking Ahead

(ES) Spain Oct YTD Budget Balance: No est v -€17.0B prior

05.30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender

05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

05:30 (UK) DMO to sell £400M in 4% Jan 2060 Gilts

06:00 (IE) Ireland Oct Retail Sales Volume M/M: No est v -2.4% prior; Y/Y: No est v 1.2% prior

06:45 (US) Daily Libor Fixing

07:00 (DE) Germany Dec GfK Consumer Confidence: 10.7e v 10.7 prior

07:00 (IT) Italy Fin Min Podoan at event

07:00 (RU) Russia announces weekly OFZ bond auction

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (US) Treasury Sec Mnuchin with Fed's Dudley at conference

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Oct Advance Goods Trade Balance: -$65.0Be v -$64.1B prior

08:30 (US) Oct Preliminary Wholesale Inventories M/M: 0.4%e v 0.3% prior, Retail Inventories M/M: No est v -1.0% prior

08:30 (CA) Canada Oct Industrial Product Price M/M: +0.5%e v -0.3% prior; Raw Materials Price Index M/M: 3.0%e v 0.1% prior

08:55 (US) Weekly Redbook Sales

09:00 (US) Sept FHFA House Price Index M/M: 0.4%e v 0.7% prior; Q/Q: No est v 1.6% prior

09:00 (US) Sept S&P/ Case-Shiller 20-City M/M: 0.30%e v 0.45% prior; Y/Y: 6.04%e v 5.92% prior; House Price Index (HPI): No est v 202.87 prior

09:00 S&P Case-Shiller (overall) HPI Y/Y: No est v 6.07% prior; Overall HPI Index : No est v 195.05 prior

09:00 (EU) Weekly ECB Forex Reserves

09:00 (MX) Mexico Oct Unemployment Rate (Seasonally adj): 3.3%e v 3.3% prior, Unemployment Rate (unadj): 3.4%e v 3.6% prior

09:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

10:00 (US) Nov Consumer Confidence: 124.0e v 125.9 prior

10:00 (US) Nov Richmond Fed Manufacturing Index: 14e v 12 prior

10:00 (US) Senate Banking Committee holds hearing on Fed Chair Nominee Powell

10:15 (US) Fed's Harker (voter, hawk)

10:30 (CA) Bank of Canada (BOC) Financial System Review

11:30 (BR) Brazil Oct Central Govt Budget Balance (BRL): +3.0Be v -22.7B prior

11:30 (CA) Bank of Canada (BOC) Gov Poloz press conference

11:30 (US) Treasury to sell 4-Week Bills

13:00 (US) Treasury to sell 7-year notes

15:00 (NZ) New Zealand Central Bank (RBNZ) Financial Stability Report

16:30 (US) Weekly API Oil Inventories