EXECUTIVE SUMMARY
- BOJ KEEPS POLICY RATE AT 0.25%, JANUARY HIKE CALLED INTO QUESTION
- MNI BOE PREVIEW - 8-1 VOTE FOR HOLD
- RIKSBANK CUTS 25BPS; FORESEES ONE MORE CUT IN H1 2025
- NORGES BANK HOLDS, SAYS CUT MOST LIKELY MARCH 2025
Figure 1: USD/JPY clears bull trigger and post-election high
Source: MNI/Bloomberg
NEWS
US (WaPo): Republicans Scrap Spending Bill, Under Pressure From Trump And Musk
Republicans scrapped House Speaker Mike Johnson's bipartisan plan to avert a government shutdown, as President-elect Donald Trump and Elon Musk joined a broad swath of the House GOP on Wednesday to condemn a compromise bill full of Democratic policy priorities. The rebuke, which built steadily through the day and culminated with a long written statement from Trump in the late afternoon, has forced Johnson back to the drawing board on a plan to prevent a Christmastime shutdown - and maintain the support of his chaotic conference to be reelected as speaker early next year.
BOJ (MNI): BOJ Keeps Policy Rate at 0.25%, January Hike Eyed
The Bank of Japan Board on Thursday decided 8-to-1 to keep the unsecured overnight call loan rate at 0.25%, increasing chances of a January hike after ascertaining wage data and the outlook for the U.S. economy. Naoki Tamura, former bank executive, proposed to hike the rate to 0.50%, citing the increasing upside risk to prices, but his proposal was defeated by a majority vote.
BOJ (MNI): BOJ Wants More Wage Data, US Econ Outlook - Ueda
Bank of Japan Governor Kazuo Ueda told reporters Thursday that the BOJ needed to see more wage data and the outlook for the U.S. economy before deciding on the next rate hike, following the Board’s decision to hold the policy rate at 0.25%. Heightened uncertainty over the U.S. economy including the effects of President-elect Donald Trump’s economic and trade policies, and wage hike momentum drove the Board’s decision, he explained. On a potential January hike, Ueda said a certain level of wage momentum and the outlook for the U.S. economy will become clearer at the next meeting and the BOJ will make a comprehensive judgment based on available data and information at that time.
MNI BOE PREVIEW - DECEMBER 2024: 8-1 Vote for Hold
We expect this week’s MPC meeting to see an 8-1 vote split for Bank Rate to be on hold (with Dhingra the sole dissenter looking for a 25bp cut) and with guidance largely unchanged. We look through where we expect each MPC member to sit within the "cases" framework. And we look at when we do expect the guidance to change, and what could be the triggers.
RIKSBANK (MNI): Riksbank Cuts 25bps; Foresees One More Cut in H1 2025
The Riksbank cut the policy rate by 25 basis points to 2.5% at its December meeting and said that if the economic outlook remained unchanged it may cut again during the first half of 2025. The Riksbank Executive Board's guidance, leaving the timing of the H1 cut open, was unchanged and analysts had fully anticipated the 25 basis point cut. The Swedish central bank highlighted its concerns over the weakness of the economic recovery with inflation having stabiliised around target.
NORGES BANK (MNI): Norges Bank Holds, Says Cut Most Likely March 2025
Norges Bank has left its policy rate on hold at 4.5%, a move ensuring the bank's policy rate was unchanged throughout 2024. The Norwegian central bank has stayed out of step with its peers and is yet to start the easing cycle, but the first cut is coming closer. The policy committee saying that the policy rate was most likely to be lowered in March next year. Governor Ida Wolden Bache said that "the time is soon to start lowering interest rates" with inflationary pressures somewhat weaker than previously assumed.
ECB (MNI EXCLUSIVE): ECB Agrees on Gradual Cuts to Neutral - Centeno
MNI speaks to Bank of Portugal Governor Mario Centeno - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
ECB (MNI EXCLUSIVE): ECB to Drop "Meeting-By-Meeting" - Papadia
MNI speaks to former ECB head of market operations Francesco Papadia - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
FRANCE (MNI): Bayrou Holds Further Meetings on Forming Gov't; PS to Stay in Opposition
Prime Minister Francois Bayrou will hold the final set of talks as part of the first round of consultations on forming a new gov't today (19 Dec). The PM remains under pressure to put together a coalition that will prove more stable than that of his predecessor Michel Barnier and able to form a budget. However, the outlook is already bleak. The far-left La France Insoumise (LFI) and far-right Rassemblement National (National Rally, RN) are not invited to the talks, although their participation in a gov't was already a non-starter.
GERMANY (BBG): Scholz’s Far-Right Rival Puts Germany’s EU Exit on the Ballot
Alice Weidel, the long-shot chancellor candidate from the far-right Alternative for Germany, slammed the European Union for destroying the country’s auto industry and proposed winding back the bloc to a free-trade zone. “What we need to have is free trade among the European countries, but we don’t need all the bureaucracy,” co-leader of the second-strongest party in German polls told Bloomberg TV in Berlin. The EU’s “socialist policy making” has “destroyed the market mechanism in Europe.”
EUROPEAN COUNCIL (MNI): Final Summit of 2024; Trump, Ukraine, MidEast on Agenda
The final European Council summit of 2024 is set to get underway shortly, with member state leaders arriving and delivering doorstep comments currently (live stream here). Politico outlines the three major topics for leaders to deal with today: "The EU’s role in the world and how to prepare for the U.S.’s limited role in Ukraine; how to handle a potential new trade war between the U.S. and China; and the situation in the Middle East." Headlines likely to emerge throughout the day on these three main topics, with a presser likely in the afternoon and then later at night once the EUCO conclusions have been agreed.
CHINA (BBG): PBOC Offers Strongest Yuan Support Since July After Dollar Gains
China ramped up support for its currency via the daily reference rate after the Federal Reserve’s caution over future interest rate cuts boosted the dollar and sent the offshore yuan to a one-year low. The People’s Bank of China set the so-called fixing at the strongest bias since July versus the average estimate in a Bloomberg survey on Thursday. That sent the offshore yuan 0.2% higher. The move is a sign authorities are ramping up support for the yuan in the face of the dollar’s resilience and growing expectations that China will tolerate a weaker currency to mitigate the impact of US tariffs on the nation’s exports.
CHINA (BBG): China Banks Raise Mortgage Rates For the First Time Since 2021
Chinese banks raised new mortgage costs for the first time in three years, new data from a research firm shows, as narrowing margins are dragged down by a persistent property slump and slowdown in the world’s No. 2 economy. The average mortgage rate for buyers’ first homes in 42 big cities inched up to 3.08% in November from a record low of 3.05% in the previous month, the first increase since October 2021, according to data from Singapore-based firm Data Motion International Trading Pte.
MNI CNB PREVIEW - DECEMBER 2024: Time to Press Pause
Consensus has been converging towards the view that the Czech National Bank (CNB) will pause its rate-cutting cycle at the December meeting. Communications from several central bank members signalled that an on-hold decision is very much on the table as the two-week repo rate gets closer to its neutral level. In addition, the temporary flare-up in headline inflation coupled with the imminent seasonal repricing of goods and services in January warrant caution on the Bank Board’s part.
MNI BANXICO PREVIEW - DECEMBER 2024: Bolder Easing Votes in Focus
Following the dovish tilt to Banxico’s unanimous cut in November, subsequent central bank rhetoric has evolved in a similar direction. While most analysts expect another 25bp move to 10.00% in December, there are notable calls for the committee to imminently step up the pace of easing. Indeed, Governor Rodriguez has not ruled out larger cuts ahead, appearing content with latest developments in the currency market and the markets interpretation of the latest budget proposal for 2025.
BRAZIL (BBG): Brazil Congress Again Waters Down Fiscal Plan as Real Sinks
Brazil’s congress further weakened the first proposal of President Luiz Inacio Lula da Silva’s austerity package after the real hit a record low on concern the government won’t rein in a surging fiscal deficit. Following approval late Tuesday of the main text, lawmakers Wednesday voted 444-16 to overturn a measure reinstating a vehicle tax and barred the government from blocking the use of public funds earmarked by legislators for local projects.
CORPORATE (BBG): Micron Set for Biggest Drop Since 2020 on Sluggish Sales Outlook
Micron Technology Inc., the largest US maker of computer-memory chips, is set for its biggest share decline in more than four years after its revenue forecast missed projections, hurt by sluggish demand for smartphones and personal computers. Sales will be roughly $7.9 billion in the fiscal second quarter, which runs through February, the company said in a statement Wednesday. That compares with an average analyst estimate of $8.99 billion. Profit will be no more than $1.53 a share, minus certain items, well short of the $1.92 projection.
DATA
GERMANY DATA (MNI): Consumer Confidence Rises Slightly, Job Concerns Weigh
- GERMANY GFK JANUARY CONSUMER CLIMATE -21.3
The GfK Consumer Climate for Germany rose slightly in the January print, to -21.3 points. While the rise was not strong enough to reverse December's 4.7 point drop to -23.1, the print points towards some stabilization at a weak level - "in addition to the positive developments in income expectations and the willingness to buy, a declining willingness to save is contributing to the slight recovery of the consumer climate", GfK comments.
FRANCE DEC MANUF SENTIMENT AT 97 (MNI)
AUSTRALIA DATA (MNI): December Inflation Expectations Rise But Q4 Lower
The Melbourne-Institute's measure of consumer inflation expectations picked up to 4.2%, the highest since September. In November it fell to 3.8%, below 4% for the first time since August 2021. Looking through the volatility, the Q4 average eased 0.4pp to 4.0%, which is good news and consistent with the RBA "gaining some confidence that inflationary pressures are declining". The pickup in petrol prices since end-November likely boosted expectations. Also, Westpac reported in December that news on inflation continues to dominate consumers' recall with their assessments improving "only slightly". November CPI prints on January 8 and December/Q4 on January 29.
FOREX: USD/JPY Makes Light Work of Bull Trigger on Dovish BoJ
- Currency markets are in the midst of comfortably their busiest morning of the week, with G10 FX volumes surging well ahead of average for this time of day. Most notably, JPY futures are seeing volumes triple what you'd expect to see, thanks to the dovish outturn from the BoJ decision which allayed expectations for a rate hike in January, and saw the JPY spiral lower.
- As a result, USD/JPY has cleared the bull trigger and the post-election high from mid-November, printing a new multi-month high and getting a significant dose of upside momentum in the process. This opens a broader range for the currency headed into 2025, evident in the skew toward the short-end of the JPY vol curve.
- GBP trades well, gaining alongside a further widening in EUR-GBP rate differentials today (the SFR - ER Z5 spread is at new record levels), helping pressure EUR/GBP to a new pullback low, adding additional pressure to the single currency, that was already underperforming on the back of the hawkish interpretation of the Fed decision.
- Focus for the session ahead remains on central banks, with the Bank of England seen keeping their policy rate unchanged. An 8-1 vote for no change is consensus, and the lack of a post-decision press conference could limit any subsequent market volatility. Weekly claims data are the highlight in the US, with existing home sales for November also on the docket.
BONDS: Close to Highs But Fed Fallout Clearly Still Weighs
- EGBs and Gilts have pared losses seen with the open, currently trading close to session highs, but continue to exhibit clear catch-up from yesterday’s hawkish Fed decision which sees only one additional 25bp cut fully priced for 2025.
- Bunds outperform (10Y yields +3.2bps) and BTPs underperform (+5.5bps) in no surprises with that backdrop.
- The BTP-Bund 10Y spread has broadly held around 118bp (+3bp) since the open, at highs since Dec 3/4.
- Gilts also underperform with 10Y yields +5.3bps with no let up in hawkish BoE pricing.
- In futures, RXH5 at 134.23 (-.38) has lifted off lows of 133.79. The low came close to fresh support at 133.62 (Nov 22 low) whilst resistance isn’t seen until 135.23 (20-day EMA).
- G H5 trades at 92.15 (-.69) off a low of 91.87 shortly after the open. The impulsive sell-off has extended and it came close to fresh support at 91.73 (Fibo projection of Dec 3-4-5 minor price swing) whilst resistance is seen at 92.58 (Dec 18 low and a gap high on the daily chart).
- As for shorter-term rates, ECB-OIS prices 28bp of cuts for Jan and a cumulative 98bp for June or 114bp for Oct.
- That’s in contrast to BoE-dated OIS which now only prices ~12.5bps of easing through the February meeting and with just over 50bps of cuts priced through the course of 2025. SONIA implied terminal rate expectations of 3.97% are just shy of cycle highs.
- The raft of recent central bank meetings clearly sets the tone then, dwarfing today’s European data including German consumer confidence, French mfg sentiment and the EZ current account.
- The BoE decision is still to come at 1200GMT (no press conference or MPR).
EQUITIES: Sharp Sell-Off in E-Mini S&P Results in Breach of 20-, 50-Day EMAs
A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the latest pullback highlights the potential start of a corrective cycle. Price has traded through the 50-day EMA, at 4898.37. A continuation lower would open 4819.33, a Fibonacci retracement. On the upside, key short-term resistance has been defined at 5014.00, the Dec 9 high. A break of this hurdle would confirm a resumption of the recent uptrend. A sharp sell-off in the S&P E-Minis contract yesterday highlights a possible short-term top. The move down has resulted in a breach of both the 20- and 50-day EMAs. A continuation lower would open 5811.65, a Fibonacci retracement level. Note that support at 5921.00, the Nov 19 low, has been pierced. A clear break of this level would strengthen a bearish threat. Initial resistance is at 6011.85, the 50-day EMA.
- Japan's NIKKEI closed lower by 268.13 pts or -0.69% at 38813.58 and the TOPIX ended 6.04 pts lower or -0.22% at 2713.83.
- Elsewhere, in China the SHANGHAI closed lower by 12.175 pts or -0.36% at 3370.033 and the HANG SENG ended 112.04 pts lower or -0.56% at 19752.51.
- Across Europe, Germany's DAX trades lower by 195.11 pts or -0.96% at 20047.48, FTSE 100 lower by 92.77 pts or -1.13% at 8106.35, CAC 40 down 87.54 pts or -1.19% at 7299.23 and Euro Stoxx 50 down 66.16 pts or -1.33% at 4893.08.
- Dow Jones mini up 129 pts or +0.3% at 42452, S&P 500 mini up 25.25 pts or +0.43% at 5897.5, NASDAQ mini up 76 pts or +0.36% at 21294.75.
Time: 09:50 GMT
COMMODITIES: Gold Recovers from Post-Fed Lows
A bearish threat in WTI futures remains present and recent gains are - for now - considered corrective. A resumption of the bear cycle would open $65.57, the Oct 1 low, and $63.73, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance to watch is unchanged at $71.97, the Nov 7 high. Gold traded lower yesterday. The move down undermines a recent bullish theme. A resumption weakness would signal scope for an extension towards the key support at $2536.9, the Nov 14 low. Moving average studies are in a bull mode position highlighting a medium-term uptrend and this suggests that the latest sell-off is likely a correction. Initial pivot resistance is $2650.4, the 20-day EMA. A breach of it would be positive for bulls.
- WTI Crude down $0.01 or -0.01% at $70.57
- Natural Gas up $0.07 or +1.93% at $3.44
- Gold spot up $34.46 or +1.33% at $2620.11
- Copper down $6.4 or -1.54% at $409.2
- Silver up $0.21 or +0.71% at $29.5575
- Platinum up $7.99 or +0.87% at $928.85
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 19/12/2024 | 1200/1200 | *** |  GB | Bank Of England Interest Rate |
| 19/12/2024 | 1200/1200 | GB | BOE MPS and Minutes | |
| 19/12/2024 | 1200/1200 | GB | BOE Agents' summary of business conditions | |
| 19/12/2024 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 19/12/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 19/12/2024 | 1330/0830 | *** | US | GDP |
| 19/12/2024 | 1330/0830 | * |  CA | Payroll employment |
| 19/12/2024 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 19/12/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 19/12/2024 | 1500/1000 | *** | US | NAR existing home sales |
| 19/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 19/12/2024 | 1600/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 19/12/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 19/12/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 19/12/2024 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 5 Year Note |
| 19/12/2024 | 1900/1400 | *** |  MX | Mexico Interest Rate |
| 19/12/2024 | 2100/1600 | ** | US | TICS |
| 20/12/2024 | 2330/0830 | *** |  JP | CPI |
| 20/12/2024 | 0700/0700 | *** | GB | Public Sector Finances |
| 20/12/2024 | 0700/0800 | ** |  DE | PPI |
| 20/12/2024 | 0700/0800 | ** |  SE | PPI |
| 20/12/2024 | 0700/0800 | ** | SE | Retail Sales |
| 20/12/2024 | 0700/0700 | *** | GB | Retail Sales |
| 20/12/2024 | 0745/0845 | ** |  FR | PPI |
| 20/12/2024 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 20/12/2024 | 0900/1000 | ** |  IT | ISTAT Business Confidence |
| 20/12/2024 | 0900/1000 | ** | IT | ISTAT Consumer Confidence |
| 20/12/2024 | 1100/1200 | ** | IT | PPI |
| 20/12/2024 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |
| 20/12/2024 | 1330/0830 | ** | CA | Retail Trade |
| 20/12/2024 | 1330/0830 | ** | CA | Retail Trade |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |
| 20/12/2024 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 20/12/2024 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 20/12/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 20/12/2024 | 1630/1630 | GB | BOE to announce Q1-25 APF sales schedule |