Sample Category Title

Notes/Observations

• Focus on central banks and prospect of tighter monetary policy (Fed on Wed, BOE on Thurs).
• Germany Sept Retail sales data misses expectations.
• Japan Nikkei surges after LDP secured a majority in Parliament with results reinforcing bets for fiscal stimulus and reforms.

Asia

• China Oct Manufacturing PMI (Govt official) registered its 2nd consecutive contraction (49.2 v 49.7e).
• China Oct Caixin PMI Manufacturing registered its 2nd consecutive expansion (50.6 v 50.0e).
• Japan Oct Final PMI Manufacturing: 53.2 v 53.0 prelim (confirmed the 9th straight month of expansion and highest since April).
• Australia Oct Final PMI Manufacturing: 58.2 v 57.3 prior (confirmed 17th month of expansion).
• Japan LDP secured outright majority in Parliament elections over the weekend but with fewer seats than it won in previous election (Won 261 seats of the 465 seats available compared to 276 prior). Results reinforced bets for fiscal stimulus and reforms.
• Japan PM Kishida stated that would compile a "large-scale" stimulus package around mid-November and aim to pass through parliament an extra budget by the end of this year.
• RBA purchased bonds on Monday but none of the April 2024 where it has the Yield Control target.
• China Foreign Min Wang stated that Taiwan was the most sensitive issue between China and the US. Reiterated criticism about the US interfering in China's internal affairs and noted anti-China sanctions had severely disrupted normal bilateral exchanges.
• China PBOC Open Market Operation (OMO) injected only CNY10B in 7-day reverse repos for a net drain CNY190B v Net inject CNY100B prior.

Europe

• France President Macron said to have given UK PM Johnson 24 hours to grant licenses for small French boats or France would stop British boats from landing their catches. France also considering reducing energy supplies to Jersey.
• France President Macron stated that there had been no provocation and no tension over fishing rights dispute with UK. Wanted to cooperate with Britain and find a deal on fishing but the ball was in UK camp.
• EU's Sefcovic stated that UK must not embark on a path of confrontation as tensions rise over fishing rights and goods passing through Northern Ireland.
• PM Johnson stated that would take appropriate action if needed in fisheries spat, not convinced EU solutions fixed Northern Ireland protocol. Expressed deep concerns to French President Macron over French rhetoric including the suggestion that EU should punish Britain over Brexit. Fishing license issue needs to be sorted out in post Brexit trade agreement, our position on fishing licenses hasn’t changed, we would welcome French proposals to de-escalate situation.
• Brexit Min Frost stated that was actively considering launching dispute settlement proceedings against France amid fishing rights tensions.
• G20 leaders endorse global minimum corporate tax deal and pledged more vaccines for the poor ‘; Leaders endorsed a global minimum tax, with major corporations facing a minimum 15% tax wherever they operate from 2023. Draft communique remained committed to capping global warming well below 2 degrees Celsius and pursue efforts to limit it to 1.5C.
• Fitch affirmed Germany sovereign rating at AAA; Outlook Stable.
• Canadian ratings agency DBRS affirmed Italy sovereign rating at BBB (high); Revised trend to Stable from Negative.

Americas

• US Treasury Sec Yellen reiterated US stance that wants China to meet phase 1 trade deal commitments; Looking at eventual reciprocal lowering of tariffs. Sees solid US recovery and rejected bond market’s growth concerns.
• Sec of State Blinken met with China Foreign Ming Wan and stressed opposition to any unilateral changes by China to the status quo around Taiwan and made clear that US had not changed its "one China" policy regarding Taiwan.
• US and Russian high-ranking officials said to have held a series of 'secret' meetings after Biden-Putin summit in June to discuss cybersecurity and arms control issues.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.69% at 478.78, FTSE +0.56% at 7,277.57, DAX +0.96% at 15,839.05, CAC-40 +1.11% at 6,906.23, IBEX-35 +1.06% at 9,153.50, FTSE MIB +1.38% at 27,248.00, SMI +0.69% at 12,191.51, S&P 500 Futures +0.41%].
• Market Focal Points/Key Themes: European indices open higher across the board and advanced further into the green as the session progressed; sectors leading to the upside include health care and materials; while more sluggish sectors include real estate and consumer discretionary; muted trading session as most European countries are on holiday, although markets are open; Essity acquires sports tape brands from J&J; reportedly GlaxoSmithKline looking to acquire Aurinia; reportedly Santander and Bankinter have held preliminary merger talks; earnings expected during the upcoming US session include Avis Budget, Mosaic and Nutrien.

Equities

• Consumer discretionary: Ryanair [RYA.UK] -4% (earnings; raises traffic outlook but cuts profit outlook).
• Financials: Barclays [BARC.UK] -2% (CEO steps down).
• Healthcare: AstraZeneca [AZN.UK] +1% (divests rights), Pandora [PNDORA.DK] -4% (prelim results; outlook raise).
• Industrials: Implenia [IMPN.CH] +5% (affirms outlook).

Speakers

• Japan PM Kishida said to considering Motegi for position of LDP Secretary.
• ChinaPBOC backed Paper: To continue lowering share of mortgages in whole loans. China’s funding to the property sector would be used more in regions that were backed by industries and have advantages in attracting population growth.
• Kuwait Oil Min Khaled al-Fadhel supported OPEC+ oil production increase plan of 400K bpd as it guaranteed supplies. - Markets to face challenges in 2022.
• Saudi Oil Min Abdulaziz: Kingdom stresses the importance of ensuring an affordable price for energy.
• Saudi Foreign Min bin Farhan stated that the country was committed to stabilizing the oil market.

Currencies/Fixed Income

• USD on solid footing with focus on Wed’s FOMC decision with the Fed widely expected to announce a tapering of stimulus. Focus on central banks and prospect of tighter monetary policy (RBA on Tues, Fed on Wed, BOE on Thurs).
• GBP/USD back below the 1.37 level. Markets weighing whether the BOE would raise rates at the meeting. Currently market participant almost fully priced for 15bps increase and further 100 bps worth of tightening seen over the next year given some of the hawkish rhetoric from permanent BoE officials, such as Gov Bailey and chief economist Pill.
• USD/JPY tested above 114.30 following Japan Parliamentary results. LDP did retain its majority (although less seats from before). Results reinforced bets for fiscal stimulus and reforms and eased doubts about the new prime minister's popularity.
• AUD/USD trading around 0.75 with focus on Tuesday’s RBA decision. Markets pondering whether RBA could mark a retreat from its dovish rate policy.. Some speculation that RBA could ease or remove April 2024 YCC as the Apr 2024 bond yield recently moved above 0.70% (RBA did recently purchased bonds this week but none of the April 2024 where it has the Yield Control target. Also some speculation the forward guidance could be tweaked for chance hiking in 2023 rather than wait for 2024.

Economic data

• (RU) Russia Oct PMI Manufacturing: 51.6 v 50.5e (1st expansion in 5 months ).
• (DE) Germany Sept Retail Sales M/M: -2.5% v +0.4%e; Y/Y: -0.9% v +1.8%e.
• (TR) Turkey Oct PMI Manufacturing: 51.2 v 52.5 prior (5th straight expansion).
• (TH) Thailand Oct Business Sentiment Index: 47.0 v 42.6 prior.
• (SE) Sweden Oct PMI Manufacturing: 64.4 v 64.7 prior (17th month of expansion).
• (NL) Netherlands Oct Manufacturing PMI: 62.5 v 61.2e (15th straight expansion).
• (CH) Swiss Oct PMI Manufacturing: 65.4 v 66.5e (15th straight expansion).
• (CZ) Czech Republic Oct PMI Manufacturing: # v 56.8e.
• (HK) Hong Kong Q3 Advance GDP Q/Q: 0.1% v 0.6%e; Y/Y: 5.4% v 5.7%e (avoids technical recession).
• (NG) Nigeria Oct PMI Manufacturing: 54.1 v 52.3 prior.
• (GR) Greece Oct Manufacturing PMI: 58.9 v 58.4 prior (8th month of expansion).
• (NO) Norway Oct PMI Manufacturing: 58.5 v 59.0 prior (14th month of expansion).
• (CH) Swiss weekly Total Sight Deposits (CHF): 717.1B v 715.3B prior; Domestic Sight Deposits: 645.3B v 642.4B prior.
• (UK) Oct Final Manufacturing PMI: # v 57.7e (confirmed 17th straight expansion).

Fixed income Issuance

• None seen.

Looking Ahead

• (ZA) South Africa Oct Naamsa Vehicle Sales Y/Y: No est v 15.8% prior.
• (UR) Ukraine Central Bank Oct Minutes.
• (RO) Romania Oct International Reserves: No est v $46.2B prior.
• (IT) Italy Oct Budget Balance: No est v -€15.3B prior.
• (AR) Argentina Oct Government Tax Revenue (ARS): No est v 976.3B prior.
• (RU) Russia Central Bank Quarterly Monetary Policy Report.
• 06:00 (DK) Denmark Oct Danish PMI Survey: # v 65.2 prior.
• 06:00 (EU) Daily Euribor Fixing.
• 06:00 (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills.
• 06:25 (EU) Daily ECB Liquidity Stats.
• 06:30 ((DE) Germany to sell combined €6.0B in 3-month and 9-month BuBills.
• 06:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.
• 06:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
• 07:00 (IL) Israel to sell bonds.
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
• 07:45 (US) Daily Libor Fixing.
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
• 08:30 (CA) Canada Sept MLI Leading Indicator M/M: No est v 0.3% prior.
• 09:00 (BR) Brazil Oct PMI Manufacturing: No est v 54.4 prior.
• 09:00 (CZ) Czech Oct Budget Balance (CZK): No est v -326.3B prior.
• 09:00 (UK) Daily Baltic Dry Bulk Index.
• 09:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions.
• 09:45 (US) Oct Markit Final Manufacturing PMI: 59.2e v 59.2 prelim.
• 10:00 (US) Sept Construction Spending M/M: 0.4%e v 0.0% prior.
• 10:00 (US) Oct ISM Manufacturing: 60.5e v 61.1 prior; Prices Paid: 82.0e v 81.2 prior.
• 10:30 (CA) Canada Oct Manufacturing PMI: No est v 57.0 prior.
• 10:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (3-7 years).
• 11:00 (MX) Mexico Sept Total Remittances: $4.5Be v $4.7B prior.
• 11:00 (MX) Mexico Central Bank Economist Survey.
• 11:00 (PE) Peru Oct CPI M/M 0.2%e v 0.4% prior; Y/Y: 5.3%e v 5.2% prior.
• 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
• 13:00 (IT) Italy Oct New Car Registrations Y/Y: No est v -32.7% prior.
• 14:00 (BR) Brazil Oct Trade Balance: $2.4Be v $4.3B prior; Total Exports: $23.0Be v $24.3B prior; Total Imports: $20.6Be v $20.0B prior.
• 14:00 (MX) Mexico Oct IMEF Manufacturing Index: No est v 49.8 prior; Non-Manufacturing Index: No est v 50.1 prior.
• 17:45 (NZ) New Zealand Sept Building Permits M/M: No est v 3.8% prior.
• 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 106.8 prior.
• 19:00 (KR) South Korea Oct CPI M/M: 0.2%e v 0.5% prior; Y/Y: 3.3%e v 2.5% prior; CPI Core Y/Y: 2.6%e v 1.9% prior.
• 19:50 (JP) Japan end-Oct Monetary Base: No est v ¥663.5T prior.
• 23:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.10% and maintain 3-year Yield Target at 0.10%.
• 23:30 (HK) Hong Kong to sell 3-month Bills.
• (ZA) South Africa hold local government elections.

On Friday, the yellow metal's price plunged to the 1,772.35 level, before starting to recover. On Monday, the recovery of the price had retraced to the 1,790.00 level and the previously passed support line of the last week's low levels.

If the price passes the resistance of the 1,790.00 mark, it would immediately encounter the resistance of the 55, 100 and 200-hour simple moving averages at 1,791.31/1,793.50.

However, a decline of the price might look for support in the previous low level at 1,772.35, before aiming at the mid-October low levels at 1,767.40 and 1,760.85.

The USD/JPY currency exchange rate continued to surge throughout Friday. The surge extended into Monday. However, during the early hours of the day's trading, the pair found resistance in the mid-October high level zone at 114.44/114.47.

A passing of the 114.44/114.47 zone might find resistance in the weekly R1 at 114.49, Afterwards, the October high level at 114.70 could provide resistance.

On the other hand, a decline would have no support as low as the 113.80/113.90 zone. In that zone the 55, 100 and 200-hour simple moving averages are located together with the weekly simple pivot point at 113.88. Meanwhile, take into account that the 114.00 mark might serve as support.

The GBP/USD broke the channel up pattern at mid-day on Friday. The event resulted in a sharp decline to the 1.3670 level. Afterwards, a short lived recovery found resistance in the 1.3700 mark. By the middle of Monday's European trading hours, the pair had reached the 1.3650 level.

In the case that the decline passes the support of the 1.3650 mark, the rate might look for support in the weekly S1 simple pivot point at 1.3628. Below the S1 the weekly S2 simple pivot point at 1.3567 could slow down a decline.

Meanwhile, a recovery of the GBP/USD rate is highly likely going to encounter resistance in the 1.3700 mark and the previous week's low level at 1.3710. Above these levels, the weekly simple pivot point at 1.3729 might keep the rate down.

Bitcoin is still extending the corrective pattern from 66982. The first leg should have completed at 57762, and rise fro there should be the second leg. Break of 62954 resistance will target at test on 66982 high. For now, we're not expecting a firm break there in the first attempt. Instead, we'd expect one more falling leg before the corrective pattern completes. Still, in that case, we'd expect strong support from 38.2% retracement of 39559 to 66982 at 56506 to contain downside to bring rebound.

The EUR/USD currency exchange rate started a decline on Friday morning, which received a major boost at 08:00 GMT. At that time, the German Preliminary GDP was released. The data revealed that GDP of Germany had increased by 1.8% instead of the forecast 2.2%. The news fueled a decline, which eventually reached the 1.1535 level.

On Monday morning, the rate had recovered to the 1.1570 level.

If the rate continues to recover, it could encounter resistance in the last week's low level zone at 1.1585/1.1590. A surge above this zone would most likely encounter resistance in the 55, 100 and 200-hour simple moving averages in the 1.1610/1.1620 zone.

Meanwhile, a decline of the EUR/USD might find support in the 1.1535 level. Below the 1.1535 level, the weekly S1 simple pivot point could provide support at the 1.1501 level. Moreover, the 1.1500 mark could act as a support level on its own.

Wall Street unwound an intra-day selloff late in the session, on what I suspect, were month-end flows, to finish modestly in the green on Friday. The S&P 500 rose 0.19%, with the Nasdaq climbing by 0.33%, while the Dow Jones finished 0.25% higher. In Asia, US index futures are around 0.20% higher, lifted by a strong start in Japan.

Japanese election boosts Nikkei

Asian equities are very mixed. A decent Jibun PMI and the comprehensive LDP win in yesterday’s election has seen the Nikkei 225 leap 2.35% higher. Hopes for the Japan recovery, and the election green-lighting another hefty fiscal package for Japan lifting equities there. South Korea has shrugged of mixed trade data to see the Kospi rise 0.55%.

The story in China is a completely different one. The PBOC this morning, started withdrawing the recent liquidity injections. Official PMIs fell over the weekend, although the Caixin Manufacturing PMI clung to positive territory. And with my China property developers, including an Evergrande unit due to make offshore coupon payment this week, China market sentiment is decidedly negative. The Shanghai Composite has fallen by 0.50%, with the CSI 300 edging 0.25% lower. In Hong Kong the selloff is more entrenched, the Hang Seng tumbling by 1.25%.

The mixed day continues in ASEAN where Singapore has risen by 0.85%, with Jakarta 0.20% higher and Bangkok unchanged as borders reopen today to international visitors. Meanwhile, Kuala Lumpur has tumbled by 2.10% after the government announced a one-off extra tax on large companies over the weekend. Australian markets have shaken on pre-RBA nerves, as US index futures climb in Asia and international borders reopen today. Strong ANZ jobs data has lifted sentiment further with the ASX 200 rising 0.70%, and the All Ordinaries rising by 0.35%.

Much of Europe is closed for a holiday today, but German and UK markets should be able to divorce themselves from China nerves to open slightly higher this afternoon. Further falls in European natural gas prices should also be a tailwind, especially for UK markets.

UK PMI Manufacturing was finalized at 57.8 in October, slightly up from September's 57.1. That's, nonetheless, the first rise in five months. Market said new order growth ticked higher despite dropped in new export work. But selling prices rose at record pace.

Rob Dobson, Director at IHS Markit, said: " Strained global supply chains are disrupting production schedules, while staff shortages and declining intakes of new export work are also stymieing the upturn. This low growth environment is occurring in tandem with a severe upshot in inflationary pressures, with manufacturers reporting both a near-record increase in input costs and record rise in selling prices."

Full release here.

The first week of a new month is off to a brisk start today with China's PMI releases, very much a game of two halves. The weekend releases of the official Manufacturing and Services PMIs for October caused some early palpitations as both underperformed, falling to 49.2 and 52.4 respectively. However, the privately complied Caixin PMI, rose unexpectedly to 50.6, providing some relief for regional markets.

Elsewhere, Markit Manufacturing PMIs from across ASEAN, and the Jibun Manufacturing PMI in Japan showed impressive improvements, lifting Asian recovery sentiment. The exception was South Korea, whose Markit PMI fell to 50.2 from 52.4 in September. Part of the answer for the fall lies in their also released Balance of Trade. Exports grew 24% YoY, roughly as expected, but Imports surged by 40.10%, suggesting that price hikes in imported energy and raw materials are biting, although domestic demand is returning as vaccinations increase.

Japanese markets are on fire today with the Nikkei 225 up 2.0% in early trade. The weekend elections are behind the surge, as the ruling LDP retained its outright, if slightly slimmer, majority in the lower house. Pre and post the Aber-era, being the Japanese Prime Minister was as secure a position as being the Turkish Central Bank Governor. The election is an endorsement for the new Prime Minister Kishida, and markets are once again pricing in his promised fiscal stimulus package. At the periphery, the Jibun PMI outperformance will also have lifted spirits that Japan Inc's recovery remains on track.

Downunder, Australia reopens international borders today, if you are Australian and vaccinated. But it's the thought that counts, much like Scott Morrison's climate pledges. That is reason for cheer and to some extent, had offset disappointing Home Loans data for September, which fell by 2.70%. Some are saying that is a sign Australia's housing market has peaked. I say that over the last three decades, that's as dumber trade as shorting the Hong Kong dollar anticipating the peg breaking, or shorting Japanese JGB's anticipating the return of inflation in Japan (sidenote, the author shorted the HKD quite aggressively during the Asia financial crisis in his former trading desk life, and lost). Home Loan's though, have been offset by a very impressive ANZ Jobs Advertisements MoM for October, which rose by a mighty 6.20%. Even stripping out lockdown effects in Victoria and New South Wales, the data is undeniably positive.

Will RBA blink on bonds?

This will give the Lucky Country's Reserve Bank of Australia food for thought at tomorrow's policy meeting. It will add further torment to participants in Australia's financial markets. Tomorrow is Melbourne Cup Day, and for decades the RBA has refused to move its meeting, from just before the race to another day. It believes its policy meeting is more important than a horse race, the rest of the country disagrees. Tomorrow though, everyone will need to be at their desk as the RBA today, appears to have capitulated on its 0.10% 2024 bond yield target. Those yields exploded to 0.50% on Friday and today, the RBA has instead bought bonds in the 5 to 7-year tenors. A day of high drama beckons as markets wait to see if the RBA's no rate-hike before 2024 ultra-dovish guidance is officially changed. Being short the Australian dollar in the first half of this week could be a perilous trade.

This week really is the show with everything but Yul Brunner. Much of Europe is on holiday today, and Russia for the whole week, but Germany releases Retail Sales today and in the US, ISM Manufacturing PMIs. Tomorrow, we have the RBA policy decisions outlined above and pan-Europe Manufacturing PMIs. Wednesday is a Japanese holiday while Thursdays sees much of Asia, including India and Singapore, on holiday for Diwali.

That is unfortunate timing, as the latest US FOMC policy decision will have been released a few hours earlier. On Friday, the US Employment Cost Index shot higher, making the transitory inflation argument a bit harder to justify. I expect the FOMC to formally announce the start of it taper of its quantitative easing, with the real question being, how much per month will it reduce, and will it show some spine and stay the course, even if markets correct lower. I do not believe the Fed taper has been priced into markets and as US earnings season winds down, the US dollar and US yields may rise, and equities may struggle to maintain their rarefied valuations, at least for the rest of Q4.

The Bank of England announces its latest policy decision on Thursday, with markets locked and loaded for a 15 basis point hike and hawkish forward guidance. That may still occur, but I would suggest the risks are that the BOE disappoints on this front and tempers the expectations of the inflationistas. Long sterling has become another crowded trade in anticipation, and despite last Friday's month-end US dollar rally, probably still is.

Post-FOMC, another monthly US Non-Farm Payrolls has rolled around. So anyone thinking of putting their feet up post-the-see-Japanese-the-FOMC should probably think again. We'll deal with that later in the week, but needless to say, the crown noise will continue right until the stadium lights are finally turned of on Wall Street at 5 PM Friday. The Democrat spending bill continues to be negotiated and could yet impact markets, depending on its size or how watered down it will be. I shall avoid comment until I see a piece of paper with its final contents.

Finally, the travails of China's property sector may have gone quiet, but haven's gone away. Evergrande made some very last moment offshore coupon payments last week, but that's hardly the sign of a company that is in recovery, is it? Units of Evergrande have more payments due this week on November 6th, but the sector in general has around USD 2 billion in offshore payments due this month. I would direct readers to an excellent piece from Bloomberg on the subject here, Bloomberg China Property, which features a comprehensive breakdown of who has to pay what and when. The executive summary there are a lot of payments due this morning to offshore instrument holders from a number of Chinese developers.

• Equities shrug off weak China PMI data on hopes of more fiscal stimulus in US and Japan
• Dollar attempts to extend gains as investors zero in on liftoff timing
• Aussie and pound slip ahead of RBA and BoE meetings

Positive start to month as markets look past China jitters

Global equities have started November mostly in positive territory, buoyed by fresh all-time highs by Wall Street’s leading indices on Friday. Optimism seems to be the name of the game as worries about central banks winding down their pandemic-era stimulus and rising cost pressures from worsening supply constraints have yet to leave any permanent scars in stock markets.

In an earnings season where more than 80% of the S&P 500 companies that have reported have beaten their estimates, Apple and Amazon were the exception. The two tech behemoths warned on Thursday of a weaker quarter ahead, blaming component and labour shortages. However, it didn’t take long for their shares to rebound slightly on Friday.

There was fresh evidence in China over the weekend about the severity of the ballooning cost pressures on industry as well as on output being kneecapped by broadening supply shortages. China’s official manufacturing PMI fell further below 50 in October, indicating another month of contraction in the sector.

However, the equivalent Caixin/Markit private survey was a little more upbeat, with the PMI rising to 50.6 in October. Other Asian manufacturing gauges were even stronger, as regional economies got a boost from easing coronavirus restrictions.

Spending hopes lift stocks but for how long?

As has been the case lately, markets are more inclined to see the glass half full than half empty. But the reopening boost in Asia isn’t the only cause for optimism as investors can smell more fiscal spending in Japan and the United States.

Hopes are riding high in Tokyo that the stronger-than-expected performance of the ruling LDP party in Japan’s general election on Sunday will enable the new prime minister, Fumio Kishida, to press ahead with a promised spending package aimed at kickstarting the economy that has been blighted by months of Covid curbs.

The Nikkei 225 index ended the session 2.6% higher, with only shares in Hong Kong and China bucking the positive trend. US stock futures were up too, pointing to solid gains of about 0.3%, while European shares surged at the open.

Whether the bullish mood can be sustained or not in the coming days will probably depend on what the Fed says on Wednesday and if Congress can get its act together and pass President Biden’s keystone economic legislation.

Divided Democrats edged closer to a compromise last week on Biden’s ambitious social spending bill as the President unveiled a framework for the bill. The House is due to vote on Tuesday on the bill. But while there is a strong chance that the party will come together and approve the legislation, there is still some uncertainty about which way the vote will go given Democrats’ narrow majority in the House.

Dollar steady as investors eye Fed liftoff clues

The increased risk appetite weighed heavily on the safe-haven Japanese yen on Monday even as investors saw the domestic economy’s outlook brighten on the back of Sunday’s election outcome. But the US dollar sought to extend last Friday’s advances as the pound and Australian dollar faltered.

The Fed is widely expected to announce on Wednesday the commencement of tapering its $120 billion a month in asset purchases. But the bigger focus will be on Chair Powell’s updated view on inflation and whether he still thinks that the price jumps are transitory or not. Any suggestion by Powell that he is increasingly concerned about higher inflation becoming persistent could further fuel bets that the Fed will hike rates in the middle of 2022.

Policy uncertainty clouds RBA and BoE meetings

In the meantime, the Bank of England seems poised to raise its policy rate as early as its next meeting on Thursday. A dramatic hawkish shift at the BoE have lifted sterling off multi-month lows over the past month but in recent days, the currency has come under renewed pressure. While the slide is partly attributed to a stronger dollar, some paring back of market expectations of a November rate hike are also to blame amid doubts about whether the hawks outnumber the doves in the MPC.

There is also some uncertainty about the Reserve Bank of Australia’s policy meeting on Tuesday and this is spurring a retest of the $0.75 level for the aussie. After failing to defend its target on the three-year bond yield last week, the RBA will probably abandon its yield curve control programme, but policymakers will probably find another way of talking down rate hike bets through a new forward guidance.