EUROPE MORNING: Equities Catch A Nosebleed On HK Unrest

There's a bit of data risk up ahead to watch with a number of European countries reporting final consumer price inflation (CPI) figures. First up at 7am LT, Oct. German CPI y/y comes out forecast to print 0.9% in line with the prior month. Then around 8.30am LT Oct. Sweden CPI y/y gets released with consensus polling 1.6%, a few clicks above September's 1.5% print. And finally, the key data point for London morning likely comes in the form of Oct. UK CPI y/y due out at 9.30am LT. We expect GBPUSD to remain sensitive to any surprises in the print given dovish BoE comments the week before as mentioned in our last EUROPE MORNING: Data Sensitive. 
 

Overnight, markets looked to Trump's appearance at the Economic Club in NY, The King's Speech, for any indication around whether the US would look to impose auto tariffs on Europe. However, not much was given with credible reports suggesting the next likely step would be for the submission of a USTR report on possible automobiles and auto parts to the White House. If Trump does impose tariffs, we could see some more meaningful price action in EURUSD which has been subdued as of late trading inside a tight range. Though, we think market expectations right now lean towards a pushback in deadlines further out into next year.
 

A negative move of 2% in the Hang Seng driven by increasing local unrest helped broad equity benchmarks finish in the red at Asia close. ASX Cash, one of the worst performers, closed under 6,700 having shaved -0.80% in trading. It's a light reminder that there are macro thematics still playing to the downside of markets and that it could be opportune to look for asymmetric risk/reward bets, especially while risk-on hedges like USDJPY remain relatively cheap.
 

Importantly for our Kiwi and Aussie traders based out in Europe, it was the RBNZ's unexpected OCR hold that kept the wires busy through Asia. NZDUSD soared on the announcement with AUDUSD following closely behind, almost sympathetically. With the next RBNZ meeting not until early February - a couple months away, it might be said that the RBNZ board were fairly confident in how the domestic economy was tracking, and therefore, in their decision to hold. The fact that NZDUSD remains supported around 0.64 suggests markets are likely to have gleaned similar ideas. See our recap of the RBNZ's decision ex-post, as well as, our SPECIAL REPORT: RBNZ November Preview. 


NZDUSD. Source: Eikon