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Central Banks Take Center Stage this Week

David Becker
U.S. Dollar
U.S. Dollar

European shares were mixed on Monday following gains across Asia and the record high the S&P 500 clocked on Friday. Despite the firming equity markets, European yields are down. The Gilt yield has dropped by 2.6 basis points, to 1.251%, pulling back after soaring higher on Friday following news that the UK and EU had reached agreement on Brexit divorcing terms. Chinese exports and imports increased more than expected forecasting future growth. The FOMC is expected to deliver a 25-basis points hike this week by the ECB and the BoE are expected to stand pat when they meet on Thursday. The EU summit and German coalition talks will also be in focus.

Finally, there is the prospect of some clarity for businesses, which have already started to prepare for a hard Brexit amid the prolonged uncertainty since the June 23, 2016 U.K. vote to leave the EU. In Germany, there is fresh hope that new elections can be avoided after the SPD reversed its decision not to enter coalition talks.

Chinese Exports and Imports Unexpected Accelerated

China’s exports and imports unexpectedly accelerated in November, though analysts expect growth to continue cooling amid a government crackdown on financial risks. Exports in November rose 12.3% year over year which was the fastest pace in eight months, led by strong sales of electronics and high-tech goods. The actual export release beat expectations that they would rise by 5% compared to a 6.9% rise in October. Imports increased by a rapid 17.7% year over year pace in November, according to the General Administration of Customs well above expectations of 11.3% growth and rising at the fastest pace since September.

In Asia, there are plenty of important economic reports on this week’s calendar which will include Japan’s November PPI, final October production figures, and the December Tankan report. China has November industrial production, retail sales and fixed investment figures on tap. In India, industrial production, CPI, and trade data will be released. Trade, employment and production releases dot the calendars elsewhere too. There are two Asian central bank meetings on the docket, with both the Philippine central bank and Bank Indonesia expected on hold, with rates at 3.00%, and 4.25%, respectively.

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