EXECUTIVE SUMMARY
- MNI US CPI PREVIEW - STILL TOO HIGH FOR COMFORT
- ECB WILL KEEP EASING WITH ECONOMY LOSING MOMENTUM, GUINDOS SAYS
- BOJ’S UEDA JOINS DEPUTY CHIEF IN FLAGGING CHANCE OF JANUARY HIKE
- UK INFLATION SLOWS IN DECEMBER AS SERVICES EASE
Figure 1: Recent US inflation developments
NEWS
MNI US CPI PREVIEW - DECEMBER 2024: Still Too High For Comfort
Consensus sees core CPI inflation decelerating slightly to between 0.2 to 0.3% M/M in December, with MNI’s analyst review pointing to an average estimate of 0.24% so a bias toward a 0.2% rounded figure. Likely to be the single most closely watched individual aspect of Wednesday’s CPI report, rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December. Supercore inflation is seen pulling back, though, to the upper 0.20s%, from 0.34% in November.
US/EU (MNI): Dutch Govt Issues New Export Controls on Semiconductor Supply Chain
The government of the Netherlands said in a statement it has enacted new export controls on equipment used in the measuring and inspection of advanced semiconductors. The controls appear to apply to metrology and inspection systems manufactured by Dutch firm ASML - a crucial component in the supply chain of high-end chips. The announcement comes after sweeping new export controls, announced by the Biden administration this week, designed to curb the US' adversaries - including China and Russia - access to high-end semiconductor technology related to artificial intelligence.
ECB (BBG): ECB Will Keep Easing With Economy Losing Momentum, Guindos Says
The European Central Bank will continue lowering interest rates as the region’s economy struggles to grow, according to Vice President Luis de Guindos. “The policy trajectory is clear, and we expect to continue to further reduce the restrictiveness of monetary policy,” Guindos said Wednesday. “The latest information suggests that the economy is losing momentum.” In a speech in Madrid, he expressed confidence that disinflation is “well on track,” and that December’s uptick in consumer-price gains to 2.4% - further from the 2% target - was expected.
ECB (BBG): ECB’s Lane Says FX Matters Even If Firms Absorb Initial Swings
The exchange rate matters for the euro-area economy over time, though monthly movements in currency are typically absorbed by companies, European Central Bank Chief Economist Philip Lane said. “Euro-dollar movements over time - of course if it’s permanent - will filter through to prices in Europe,” he said at an event in Hong Kong on Wednesday. In the initial months of a large movement in the exchange rate, “a lot of this will be absorbed by the firms.”
ECB (BBG): ECB’s Villeroy Says Makes Sense to Cut Rates to 2% by Summer
The European Central Bank should continue to cut interest rates to reach 2% by the summer as the battle against inflation is practically won, Governing Council member Francois Villeroy de Galhau said. The French central bank chief said the neutral rate - a theoretical level that neither stimulates nor restricts the economy - is around 2% for the euro area, while the ECB’s deposit rate is currently at 3% even after three consecutive cuts of 25 basis points.
EU/RUSSIA (BBG): EU Considers Gradual Ban on Russian LNG and Aluminum
The European Union is considering import restrictions on Russian aluminum and phasing out liquefied natural gas from the nation as part of a new package of sanctions targeting Moscow for its full-scale invasion of Ukraine, according to people familiar with the matter. The draft measures, which would be part of the bloc’s 16th package of sanctions, include restrictions on dozens more vessels that are part of Moscow’s shadow fleet of tankers transporting Russian oil and further export controls on goods used for military purposes.
BOJ (BBG): BOJ’s Ueda Joins Deputy Chief in Flagging Chance of January Hike
Bank of Japan Governor Kazuo Ueda joined his deputy in strengthening market expectations for a potential interest rate hike next week, boosting the yen and signaling the central bank is doing its utmost to avoid a global market crash that followed July’s hike. The governor also indicated rising confidence over wage increases after hearing encouraging views at various new year events and at the BOJ’s recent branch managers’ meeting. He was speaking at an event hosted by the Regional Banks Association of Japan Wednesday.
CHINA (BBG): PBOC Dials Up Short-Term Liquidity Injections Amid Cash Squeeze
China’s central bank pumped a near-historic amount of short-term funds into its financial system on Wednesday, dialing up liquidity support amid a cash squeeze with the new year holiday looming. The People’s Bank of China injected a net 958.4 billion yuan ($131 billion) of cash via seven-day reverse repurchase agreements in daily open market operations, the second highest on record in data compiled by Bloomberg going back to 2004.
CHINA (MNI): China Sees Favourable Conditions for 2025 Trade
MNI (London) China sees favourable conditions for trade in 2025 despite rising trade barriers, Meng Yue, head of the Department of Foreign Trade at the Ministry of Commerce said on Wednesday. Speaking to reporters, Meng said growth in global trade will support Beijing's cross-border commerce this year, citing WTO estimates of a 3% increase. China's economic recovery and a large market for commodities will also lend support, Meng noted.
S. KOREA (MNI): Yoon's Questioning to Continue Into Night; Trial to Resume Tomorrow
The Senior Civil Servants' Corruption Investigation Office (CIO) has said that the questioning of detained President Yoon Suk-yeol will continue into the evening, but it is not yet confirmed whether this will continue overnight. Yoon is set to be moved to at the Seoul detention centre at some point overnight. The CIO has confirmed that Yoon maintains his silence and refuses to answer their questions regarding his declaration of martial law in December 2024.
BI (BBG): Indonesia Surprises Markets With a Rate Cut; Rupiah Slides
Indonesia defied market expectations by cutting its key interest rate, moving to bolster economic growth even after the local currency’s recent slide beyond the key level of 16,000 to the dollar. Bank Indonesia lowered the benchmark BI-Rate by 25 basis points to 5.75% on Wednesday. The 38 economists surveyed by Bloomberg News unanimously expected the central bank to leave policy unchanged at 6% for a fourth straight meeting.
OIL (BBG): Oil Surplus Narrows for 2025 Amid New Supply Risks, IEA Says
Global oil markets face a smaller surplus this year than previously expected amid stronger demand and new risks to supply, the International Energy Agency said. World inventories stand to build by 725,000 barrels a day in 2025, rather than the 950,000 barrels a day projected before, the adviser to major economies said in a monthly report on Wednesday. It fractionally increased global consumption estimates for 2024 and 2025.
DATA
UK DATA (MNI): UK Inflation Slows in December as Services Ease
- UK DEC CPI +0.3% M/M, +2.5% Y/Y
- UK DEC CORE CPI +0.3% M/M, +3.2% Y/Y
- UK DEC SERVICES CPI +0.3% M/M, +4.4% Y/Y
- UK DEC RPI +0.3% M/M, +3.5% Y/Y
- UK PPI DEC INPUT -1.5% Y/Y, PPI OUTPUT 0.1% Y/Y
UK headline inflation slowed modestly in December, with the annual rate of increase 2.5%, down from 2.6% in November , the Office for Naional Statistics said Wednesday. On a monthly basis, CPI rose by 0.3%. Core CPI rose by 3.2%, down from 3.5% in November. The CPI goods annual rate rose from 0.4% to 0.7%, while the CPI services annual rate - closely watched by the Bank of England - fell from 5.0% to 4.4%. The largest downward contribution to the monthly change in CPI annual rates came from restaurants and hotels; the largest upward contribution to both came from transport, particularly higher petrol prices.
EUROZONE DATA (MNI): IP In Line With Tracking, Underlying Rebounds
- EUROZONE NOV IP +0.2% M/M, -1.9% Y/Y
Eurozone November industrial production was in-line with consensus and our tracking estimate at 0.2% M/M. The October reading was also revised up to 0.2% M/M from flat (as we had estimated). We estimate IP excluding Ireland grew between 0.7-0.8% M/M, a solid rebound from -0.2% in October. All five subcomponents rose M/M (this hasn't happened in the last 6 months), with four of the five accelerating from the October reading. Energy production bounced 1.1% M/M (vs -1.3% in Oct) - the highest monthly growth since June 2024.
GERMAN DATA (MNI): GDP Fell for Second Consecutive Year in 2024
German GDP fell 0.1% Q/Q in Q4 2024 according to Destatis' preliminary estimate. That follows Q3's +0.1%, and brings total 2024 GDP growth to -0.2% Y/Y on a non-adjusted basis (in line with consensus, following -0.3% in 2023) and calendar-adjusted basis (-0.1% 2023). As drivers behind the full-year contraction, Destatis cited "increasing competition for the German export industry in important sales markets, high energy costs, persistently high interest rates, but also an uncertain economic outlook".
FRANCE DATA (MNI): French CPI Inflation Momentum Rebounded In December
- FRANCE DEC HICP 0.2% M/M, 1.8% Y/Y
- FRANCE DEC CPI 0.2% M/M, 1.3% Y/Y
French final December HICP inflation was unrevised from the flash print on a rounded basis at 1.8% Y/Y (vs 1.68% in November) and 0.2% M/M (vs -0.15% prior). On a unrounded basis HICP inflation was 1.75% Y/Y, 1 hundredth softer than the flash reading. CPI inflation was also unrevised from flash at 1.3%. On an unrounded basis, CPI was 3 hundredths softer than the flash estimate at
1.32% Y/Y. Core CPI softened to 1.3% Y/Y (from 1.5% in November).
SPAIN DATA (MNI): Broad-Based Acceleration of Spanish Inflation in December
- SPAIN DEC HICP 0.4% M/M, 2.8% Y/Y
Spanish December inflation confirmed flash estimates at 2.8% Y/Y, up from 2.4% in November. All major sub-components other than processed foods accelerated on an annual basis, with core (ex-energy/unprocessed food) inflation ticking up to 2.6% Y/Y (vs 2.5% prior). Services inflation was 3.7% Y/Y (vs 3.5% prior). A 12.4% Y/Y rise in package holidays (vs 8.1% prior) was an important factor here, with the recreation and culture component at 3.9% Y/Y (vs 2.5% prior).
SWEDEN DATA (MNI): Underlying Inflation Trends Remain Benign
- SWEDEN FINAL DEC CPIF +1.5% Y/Y (MNI)
Swedish December CPIF ex-energy inflation was 2.0% Y/Y on a rounded basis (vs 2.1% flash, 2.4% prior). The unrounded flash print was 2.05%, so its not a huge surprise to see the final reading round down. The Riksbank projected a 2.23% Y/Y in the December MPR. Overall, underlying inflation continues to develop in a manner consistent with the 2% target. This should support a further Riksbank rate cut in January. Governor Thedeen's speech today at 1430GMT/1530CET is a key focus.
SWEDEN DATA (MNI): Some Signs of Labour Market Stabilisation in PES Data
The Swedish unemployment claims rate, produced by the Public Employment Service was steady at 7.0% in December, helping the 3mma tick up to 7.0% from 6.9%. Although total vacancies rose ~10k from November's levels, they remain down 16% from a year ago. There was a ~1k rise in employee redundancy notices, but the 3mma fell below 5k for the first time since June 2023. As such, there may be some early evidence that Swedish labour market weakening is beginning to slow. However, further data is required in both the PES and LFS data in the coming months to signal a stabilisation in conditions. December LFS data is due next Friday.
FOREX: USDJPY Slips Below 20-Day EMA, GBP Whipsaws Post-CPI
- The Japanese Yen is outperforming on Wednesday, as lower core yields and BOJ rhetoric have boosted local FX sentiment. USDJPY has declined 0.77% at typing and is around 130 pips off session highs at 156.70.
- As a reminder, headlines from BoJ Governor Ueda have crossed overnight, reiterating that a decision on whether to raise rates will be made next week (so largely echoing Deputy Governor Himino's remarks from yesterday). The probability for a hike on Jan 24 has now risen to around 70%. Alongside this dynamic, lower core yields have assisted the move lower for USDJPY, with the pair slipping below its 20-day EMA for the first time since Dec 12.
- With Fed pricing having shifted so quickly away from 2025 cuts, CPI data today is a good juncture to assess whether markets have gotten too hawkish, and a deeper correction for USDJPY will target 156.02 (Dec 31 low) and 154.71, the 50-day EMA.
- GBP volatility has also been a key feature of the early Wednesday session, following the lower-than-expected UK CPI data. While sterling initially traded weaker on the release (GBPUSD down to a 1.2163 low), the potentially good news for the UK economy and the fact the downside surprise was mostly driven by volatile components assisted a sterling recovery.
- GBPUSD reversed as high as 1.2241, with similar price action for EURGBP seeing the cross briefly slip back to 0.8420.
- The USD index sits 0.2% lower on the session, extending its pullback to around 1.1% from cycle highs earlier in the week. All focus will be on the US CPI release as the near-term driver for US yields and associated greenback sentiment.
EGBS: Bunds Rise Alongside Gilts Following UK CPI
Major EGB futures have risen alongside Gilts following the lower-than-expected UK CPI reading this morning, with Bund futures +14 ticks at 130.61 at typing, just off session highs of 130.74.
- German cash yields are 0.5-3bps lower, with the belly outperforming. The 10-year Gilt/Bund spread has tightened almost 6bps on the session following the UK data.
- 10-year EGB spreads to Bunds have tightened, with BTPs outperforming. After reaching a high of 124bps on Monday, the BTP/Bund spread is now back at ~116.5bps.
- Today's 30-year Bund auction saw average results, while the EFSF has sent an RFP for an upcoming transaction, in line with MNI’s expectations. We expect the transaction to take place on Monday or Tuesday next week.
- Eurozone industrial production was in line with consensus expectations and MNI’s tracking at 0.2% M/M (vs an upwardly revised 0.2% prior).
- ECB speakers (Lane overnight, de Guindos and Villeroy this morning) have re-iterated the base case of further policy easing, but were not market movers.
- Global focus remains squarely on this afternoon’s US CPI report (1330GMT).
GILTS: Outperforming Following CPI, Curve Steepens on Dovish BoE Repricing
Gilts off morning highs after softer-than-expected CPI data drove a rally at the open.
- Markets ignore the fact that the downside surprise was mostly driven by volatile components.
- The recent increase in short positioning in futures (flagged in recent days) will be contributing to the rally.
- Limited weakness following the 4.25% Jul-34 gilt auction, which generated the lowest cover ratio for an offering of the line since ’23, countered by an average tail (there was risk of a wider tail given recent gilt weakness/vol.).
- Futures +80 at 90.05, range 89.68-90.19.
- Bearish trend in futures intact, although today’s data puts that at risk. Initial support and resistance located at 88.96 and 90.31, respectively.
- Yields 6.5-11bp lower.
- 10s ~25bp off end ’24 highs, ~11bp off early ’25 highs.
- 5s30s on track for a fresh cycle closing high, last 86.4bp.
- 10s spread vs. Bunds ~5.5bp tighter at 218bp, driven by CPI.
- BoE-dated OIS showing 51bp of cuts vs. 36.5bp late yesterday (latter represented a fresh cycle hawkish extreme).
- SONIA futures +2.5 to +11.0.
- Dovish flow seen in SONIA options this morning (covered earlier).
- Comments from BoE dovish dissenter Taylor due this afternoon (16:30 London), with particular focus on his comments in light of the recent market adjustments.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.492 | -20.9 |
Mar-25 | 4.471 | -22.9 |
May-25 | 4.378 | -32.2 |
Jun-25 | 4.338 | -36.2 |
Aug-25 | 4.262 | -43.8 |
Sep-25 | 4.247 | -45.3 |
Nov-25 | 4.206 | -49.4 |
Dec-25 | 4.191 | -50.9 |
EQUITIES: Bear Threat in E-Mini S&P Remains Present
A bull cycle in the Eurostoxx 50 futures contract remains intact and the latest pullback appears corrective. Initial support is at 4939.33, the 50-day EMA. It has been pierced, a clear break of this EMA would undermine a bullish theme and signal scope for a deeper retracement. For bulls, resistance at 5040.00, Dec 9 high, has recently been pierced. Clearance of it would resume the bull cycle that started on Nov 21 and open 5068.13, a Fibonacci projection. A bear threat in the S&P E-Minis contract remains present and short-term gains are considered corrective - for now. The reversal from the Dec 26 high, confirmed the end of the Dec 20 - 26 correction. 5866.00, the Dec 20 low and a key short-term support, has been breached. This strengthens a bearish theme and sights are on 5784.00, the Nov 4 low and an important short-term support. Initial pivot resistance is seen at 5987.43, the 50-day EMA.
- Japan's NIKKEI closed lower by 29.72 pts or -0.08% at 38444.58 and the TOPIX ended 8.23 pts higher or +0.31% at 2690.81.
- Elsewhere, in China the SHANGHAI closed lower by 13.823 pts or -0.43% at 3227.117 and the HANG SENG ended 66.29 pts higher or +0.34% at 19286.07.
- Across Europe, Germany's DAX trades higher by 93.14 pts or +0.46% at 20364.47, FTSE 100 higher by 57.16 pts or +0.7% at 8258.33, CAC 40 up 3.61 pts or +0.05% at 7427.28 and Euro Stoxx 50 up 7.78 pts or +0.16% at 4988.25.
- Dow Jones mini up 50 pts or +0.12% at 42802, S&P 500 mini up 5 pts or +0.09% at 5887.25, NASDAQ mini up 32.5 pts or +0.16% at 20951.75.
Time: 09:50 GMT
COMMODITIES: Recent Gains in Gold Appear Technically Corrective, For Now
The trend structure in WTI futures remains bullish and the contract is trading just ahead of its recent highs. The stronger reversal to the upside has resulted in a breach of key short-term resistance at $76.41, the Oct 8 high. Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high. On the downside, a reversal lower would expose the 20-day EMA, at $73.15. This average is seen as a key short-term support. Recent gains in Gold appear corrective - for now. However, the yellow metal continues to hold on to the bulk of last week’s gains and scope is seen for a continuation higher near-term. A stronger recovery would open $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2644.3, the 50-day EMA.
- WTI Crude down $0.03 or -0.04% at $77.46
- Natural Gas down $0.01 or -0.2% at $3.96
- Gold spot up $9.39 or +0.35% at $2686.8
- Copper down $0.85 or -0.2% at $433.5
- Silver up $0.21 or +0.72% at $30.1135
- Platinum up $1.49 or +0.16% at $943.78
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 15/01/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 15/01/2025 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 15/01/2025 | 1330/0830 | ** | CA | Wholesale Trade |
| 15/01/2025 | 1330/0830 | *** | US | CPI |
| 15/01/2025 | 1330/0830 | ** | US | Empire State Manufacturing Survey |
| 15/01/2025 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 15/01/2025 | 1420/0920 | US | Fed's Barkin | |
| 15/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 15/01/2025 | 1600/1100 | US | Fed's Williams | |
| 15/01/2025 | 1630/1630 |  GB | BOE's Taylor Speech on Inflation Dynamics and Outlook | |
| 15/01/2025 | 1900/1400 | US | Fed Beige Book | |
| 16/01/2025 | 0030/1130 | *** |  AU | Labor Force Survey |
| 16/01/2025 | 0700/0700 | ** | GB | UK Monthly GDP |
| 16/01/2025 | 0700/0700 | ** | GB | Trade Balance |
| 16/01/2025 | 0700/0700 | ** | GB | Index of Services |
| 16/01/2025 | 0700/0800 | *** |  DE | HICP (f) |
| 16/01/2025 | 0700/0700 | *** | GB | Index of Production |
| 16/01/2025 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 16/01/2025 | 0900/1000 | *** |  IT | HICP (f) |
| 16/01/2025 | 1000/1100 | * |  EU | Trade Balance |
| 16/01/2025 | 1230/1330 | EU | Account of Dec 2024 ECB Monetary Policy Meeting | |
| 16/01/2025 | 1315/0815 | ** | CA | CMHC Housing Starts |
| 16/01/2025 | 1330/0830 | *** | US | Jobless Claims |
| 16/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 16/01/2025 | 1330/0830 | *** | US | Retail Sales |
| 16/01/2025 | 1330/0830 | ** | US | Import/Export Price Index |
| 16/01/2025 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 16/01/2025 | 1500/1000 | * | US | Business Inventories |
| 16/01/2025 | 1500/1000 | ** | US | NAHB Home Builder Index |
| 16/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 16/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 16/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 16/01/2025 | 1730/1230 | CA | BOC Deputy Gravelle speech to women in markets group. |