US Nov. CPI rose +0.2%m/m (est. +0.1%m/m), for an annual pace of 1.2% (vs est 1.1%). The ex-food and energy measure rose 0.2% for an annual pace of 1.6% (vs est 1.5%).
US weekly initial jobless claims at 835k were higher than anticipated (est. 725k, as were continuing claims (5.757m, est. 5.21m), highlighting the impact of the increased cases of Covid across the country.
US fiscal stimulus talks: Senate Majority Leader McConnell is reportedly now on board with Mnuchin’s $916 billion proposal, citing the need to do “everything we can” to help the economy. House Speaker Pelosi saw the other $908 billion plan still being drafted by a bipartisan group of lawmakers as the best path to a deal.
ECB announced increased QE though its pandemic emergency asset purchases being raised by EUR500bn to EUR1.85tr, for an extended period (by 9 months) to at least end March 2022, while its TLTRO III favourable funding program was enhanced. ECB staff projections lowered the 2021 growth outlook and also depressed the already low path for inflation through their forecast period.
Brexit: comments from officials on EU-UK trade talks are increasingly profiling a “no-deal” end of transition. The EC issued further contingency plans for that outcome.
UK Oct. GDP rose +0.4%m/m (est. flat), due to better industrial production (+1.3%m/m, est. +0.3%m/m) and manufacturing (+1.7%m/m, est. +0.3m/m), but the more important service sector was soft at +0.2%m/m (est. +0.3%m/m).
Both UK and French officials appear to be preparing for sustained or increased Covid restrictions due to the persistence of high case counts. London is at risk of entering the highest Tier-3 restrictions.
Event Outlook
New Zealand: The November manufacturing PMI will reflect the firming of business conditions. The November update of the food price index, which has been running around 3%yr, will be released. Following this, we expect to receive the November housing market update from REINZ, which has been running red-hot since New Zealand emerged from the Covid-19 lockdown. However, last month the RBNZ announced that it would reimpose its restrictions on high loan-to-value ratio lending from March 2021 – that could see some cooling in activity from December.
US: The PPI has been supported by food and energy components recently, but the market expects growth to slow to 0.1% in November. Meanwhile, the expectations component of the December University Of Michigan Sentiment Survey should get a boost from news around the vaccine, but against a backdrop of rising case counts (market f/c: 76.0). Finally, the FOMC’s Quarles will discuss bank supervision (04:40 AEDT).\
Europe is beating the virus while the US is lagging:
But, the US is slowly going to win from here as the economy closes:
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Though Europe will spring out of it first meaning even more pressure on DXY:
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Lordy, if DXY cops that the iron ore will go to all-time highs well above $200:
And all bets are off for the iron rocket Australian dollar.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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