U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
RBA Debated Rate Hike as Inflation Risks Persist 
Bank of Korea Raises Rates to 3% as Inflation Stays Sticky 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Yen Extends Gains as BOJ Rate Hike Bets Rise 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
BOJ Set to Raise Rates to 1.25% as Inflation Risks Build 
JPMorgan Sees ECB Raising Rates to 2.75% in December 
Wall Street Analysts Weigh in on Latest NFP Data 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
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A few more central banks tiptoe to the exit 2017 was the year in which more central banks broke ranks. We expect this to continue in 2018. The Fed will hike four times and the BoC two, which supports long positions in USD and CAD.
EUR should benefit from the prospect of the ECB completing QE just as it rallied on the expectation of tapering this year.
We pair EUR vs NZD to neutralize the risk to EURUSD from a further repricing of the Fed. The RBNZ is an unlikely candidate to signal tighter policy as the slowdown in migration intensifies the downturn in housing and argues against a policy response to upside inflation risks from minimum wage increase etc. The 3m window KO halves the premium compared to a digital call.
In Sweden, the prospects of a policy pivot were delayed not derailed this year. EURSEK is currently overshooting cyclicals by over 4% the most since 2010. The rebound in inflation to 2.0% in November reduces the risk of the central bank extending QE again next week (this was 0.3% ppt higher than the Riksbank's estimate), although it could still push back the lift-off point for rates by a quarter to 3Q18 in order to better align itself with the ECB’s extension of QE through September.
Long a 9-mo 1.80 EURNZD digital call with a 3m 1.80 window KO. Paid 17.5% on November 21. Marked at 19.04%.
Long a 6m 9.60 EUR put/SEK call. Paid 57.2bp November 21. Revalued at 52bp.
We advocate deploying shorts in futures contracts of near-month tenors with a view to arresting further potential bearish risks of USDCAD, alternatively, we advocate buying USDCAD 3m risk reversal strikes 1.3440/1.2450 (at spot ref: 1.2068).
