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Citi Wealth Insights

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A positive risk on session overnight dampened late in the session by lowering vaccine rollout expectations

USD: A bipartisan fiscal stimulus deal looking more likely in US - Citi analysts’ base case for a ~$1trln fiscal package agreed ahead of December 11th is looking increasingly likely with House Speaker Pelosi and Senate Minority Leader Schumer overnight indicating Democrats would accept the ~$900bln stimulus proposal as a basis for negotiation. Citi analysts though expect this deal, if agreed, to be the last major tranche of COVID-related fiscal stimulus.
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Plenty of risk positives around but be mindful of the risks as well

USD: Risk positive - Further vaccine developments – the European Medical Agency initiates the rolling approval process for a 4th vaccine overnight whose phase 3 clinical trials could be completed in March or April 2021.
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5 drivers of the sharp rally in risk sentiment overnight and the strong accompanying selloff in USD

USD: Fed Chair Powell allaying fears concerning the rift between the US Treasury and Fed - by assuring markets that the Fed has adequate recourse to emergency lending facilities under the non-CARES Act via the Exchange Stabilization Fund even as it returns the unused portion of funds allocated to its lending programs backstopped by the CARES Act (USD465bn) at year end.
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Yellen gets Treasury nomination, Fed extends several lending facilities – but initial risk positive (USD negative) sentiment fades

USD: 2 announcements capture FX market attention overnight, sparking initial selling in USD, these being –
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China: PBoC’s Q3 Monetary Policy Report (MPR) – a signal for policy exit?

CNH: PBoC, in its MPR on Friday, describes the monetary policy stance as “more flexible and appropriate, precisely targeted” but also hints it may be time to exit from the pandemic-era monetary policy.
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ECB accounts of October meeting – a more dovish tone implying policy recalibration at the December 10 meeting but likely no rate cut

EUR: ECB minutes - On the euro zone economic outlook (GDP and inflation) - “Looking ahead, it would be important to consider the possibility that the pandemic might have longer-lasting effects both on the demand side and on the supply side, reducing potential growth”.
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