DAILY MACRO

China assets slump after weekend news Fear of broader, harsher lockdowns saps risk appetite.Possibility of reversion of earlier easing measures lurks.So base case  global slowdown and inflation haunts again .

Strong U.S. Black Friday sales - shoppers spent a record $9.12 billion online this Black Friday. With demand stayimg elevated & supply chains once again coming under pressure, the inflation is less likely to fall .Powell`s speech Wednesday will be  important event ahead of payrolls on Friday. 

Gap between  2-year and 10-year German bund yields fell to -27 bps , which was the widest inversion since Oct 1992.In the run-up to the ECB decision on 15 Dec. ECB speak this week might  provide insight into which way  committee is leaning, with another 75 bp currently heavily priced in.Only consolation so far is that the start of winter has presented with milder weather- flash CPI stands out as the one to watch on Wed. 1.0200 beckons .

Fear of more unrest, harsher lockdowns spurs bearish yuan bets.Overrides PBOC cutting RRR by 25bps on Fri.If USDCNH  closes today  above 7.2670, the Bollinger uptrend channel will be engaged- USD bulls to bet on a sustained rise beyond Oct record high towards 7.5000 psychological barrier.

UK economy is  in recession & it won’t be an easy road back.However  renaissance of GBP has been fuelled by UK political calm since Sunak took charge.If Truss and Johnson choose to  rock Sunak`s boat, it would rise risk of  next UK general election being held as early as next year - negative event for pound.Market may be baulking ahead of 200 dma at 1.2185.Break  below 1.2049, Thursday low, to target 1.1740.

Rising inflationary pressure in Japan- last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2% higher than a year before. Moreso ,the gulf in  rates imply an enormous return in holding USD- with BOJ determined to retain  easy policy when U.S. rates  rising further,  room for Yen appreciation is limited .However Thursday`s high at 139.60 is still intact, limits spot`s recovery attempts.

Declining oil off set by collapsing global demand -  not going to swing  Trade deficit  or BoP dynamics. The newer reality is that 
Rupee is  nowdays anchored to CNY on account of Trade dynamics - CNYINR  below 11.25 less likely to sustain.Erosion of carry  is a much bigger risk for Rupee .
Consolidation 81.50 - 82.00 progressing.
81.70 81.90