MNI China Daily Summary: Monday, January 13

MNI BRIEF: China December Vehicle Sales Up 10.5%

MNI BRIEF: PBOC To Add Forex Reserves Allocation In HK - Pan

MNI BRIEF: China 2024 Oil Imports Down 1.9%

CHINA DEC EXPORTS +10.7% Y/Y VS MEDIAN +7.4% Y/Y: CUSTOMS

MNI: PBOC Sets Yuan Parity Lower At 7.1885 Mon; -2.21% Y/Y

MNI BRIEF: China 2024 Exports Grow 5.9% Y/Y

CHINA 2024 EXPORTS +7.1% IN YUAN TERM: CUSTOMS

USDA: CORN STOCKS 12,074M BSL ON JAN 1

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

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FOREX: J.P. Morgan - FX Carry Trades Back In Vogue

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J.P Morgan: "USD is ending December on a strong note even before tariff risks have crystallized, defying usual seasonal patterns on a mix of positive growth (flash PMIs) and yield (Fed vs. BoJ / BoE / Norges Bank) divergences this week.
The less dovish Fed posture unveiled at the December FOMC can continue to reverberate bullishly for the dollar through early’25, as markets anticipate additional follow-through shifts on core PCE upgrades in Trump 2.0, and potentially even question the longevity of the easing cycle.
The surprisingly dovish December BoJ MPM biases risks towards later and more gradual monetary policy normalization in 2025 than our baseline. FX markets are on heightened intervention watch however that may forestall an extrapolation of the outsized BoJ day USD/JPY strength. Continue to hold cross-Yen shorts.

One artefact of DM central bank divergence is that G10 FX carry (USD,GBP vs. CHF, JPY) is back in vogue, having reversed nearly all of its July drawdown. With yield dispersion still holding in around historical highs, rotation into value may have to wait.
Trades: Stay long USD & short EUR as the election trade is not finished. Other macro themes include services/mfg r.v., policy r.v., EUR-specific weakness, flows r.v. and ongoing carry rotation. Short EUR vs USD, JPY, CHF, Scandis. Long NOK vs SEK, GBP, PLN. Short CHF/JPY, hold CAD/JPY put spread.

The last liquid trading week of the year proved to be a statement week for the USD. A packed calendar of top-tier economic data and central bank events culminated in a 1%+ DXY rally on the week, with the dollar blanking every G10 and EM comer in sight. The drivers were straightforwardly cyclical — continued signs of US growth exceptionalism on flash PMIs, buttressed by classical G4 monetary divergence (hawkish Fed vs. dovish BoJ /BoE) — that turned out to be the polar opposite of the (weak) data / (dovish Fed) policy inflections responsible for outsized late 4Q dollar sell-offs in recent years; no surprise then that seasonal dollar weakness in December has not come to pass this year, and goes to show that price seasonality, unless driven by recurring seasonal BoP flows, is often just a coincidental artefact of macro circumstances."

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J.P Morgan: "USD is ending December on a strong note even before tariff risks have crystallized, defying usual seasonal patterns on a mix of positive growth (flash PMIs) and yield (Fed vs. BoJ / BoE / Norges Bank) divergences this week.
The less dovish Fed posture unveiled at the December FOMC can continue to reverberate bullishly for the dollar through early’25, as markets anticipate additional follow-through shifts on core PCE upgrades in Trump 2.0, and potentially even question the longevity of the easing cycle.
The surprisingly dovish December BoJ MPM biases risks towards later and more gradual monetary policy normalization in 2025 than our baseline. FX markets are on heightened intervention watch however that may forestall an extrapolation of the outsized BoJ day USD/JPY strength. Continue to hold cross-Yen shorts.

One artefact of DM central bank divergence is that G10 FX carry (USD,GBP vs. CHF, JPY) is back in vogue, having reversed nearly all of its July drawdown. With yield dispersion still holding in around historical highs, rotation into value may have to wait.
Trades: Stay long USD & short EUR as the election trade is not finished. Other macro themes include services/mfg r.v., policy r.v., EUR-specific weakness, flows r.v. and ongoing carry rotation. Short EUR vs USD, JPY, CHF, Scandis. Long NOK vs SEK, GBP, PLN. Short CHF/JPY, hold CAD/JPY put spread.

The last liquid trading week of the year proved to be a statement week for the USD. A packed calendar of top-tier economic data and central bank events culminated in a 1%+ DXY rally on the week, with the dollar blanking every G10 and EM comer in sight. The drivers were straightforwardly cyclical — continued signs of US growth exceptionalism on flash PMIs, buttressed by classical G4 monetary divergence (hawkish Fed vs. dovish BoJ /BoE) — that turned out to be the polar opposite of the (weak) data / (dovish Fed) policy inflections responsible for outsized late 4Q dollar sell-offs in recent years; no surprise then that seasonal dollar weakness in December has not come to pass this year, and goes to show that price seasonality, unless driven by recurring seasonal BoP flows, is often just a coincidental artefact of macro circumstances."