EXECUTIVE SUMMARY
- MNI FED PREVIEW - GREATER CAUTION, FLATTER RATE PATH
- UK INFLATION AT 8-MONTH HIGH AHEAD OF BOE DECISION
- ECB’S LANE REITERATES THE THREE ELEMENTS OF THE ECB'S REACTION FUNCTION
- DEAL TO AVERT GOVERNMENT SHUTDOWN INCLUDES $110 BILLION IN DISASTER, FARM AID
Figure 1: FOMC meeting-dated Fed Funds implied rate paths (%)
NEWS
US (WSJ): Deal to Avert Government Shutdown Includes $110 Billion in Disaster, Farm Aid
Congressional leaders reached a bipartisan deal Tuesday to keep the government funded through mid-March and provide more than $100 billion in relief to disaster victims and farmers, but the sprawling nature of the package angered some House Republicans. The legislation was released just days ahead of Friday’s deadline to avoid a partial government shutdown. While keeping federal operations running for several months, the bipartisan proposal also includes a slew of other measures, ranging from funding the rebuilding of Baltimore’s collapsed Francis Scott Key Bridge, to expanding the sale of ethanol, to limiting some investments in China.
US (MNI): Elon Musk Appears to Call on Republicans to Vote Down Govt Funding Stopgap
Elon Musk has appeared to urge Republican lawmakers to vote down a three-month funding stopgap to avert a government shutdown on December 21, stating on X, "This bill should not pass" adding "Ever seen a bigger piece of pork?", referring to legislation seen to include extraneous measures. House Speaker Mike Johnson (R-LA) announced the stopgap yesterday after weeks of negotiations that have irked Republican conservatives and moderates alike. The final text includes USD$100 billion in disaster relief and USD$10 billion for farmers, neither of which is offset.
ECB (MNI): ECB's Lane Reiterates The Three Elements of the Reaction Function
Key notes from the conclusion of ECB Chief Economist Lane's speech at today's MNI Webcast. Initial reaction is little new relative to previous ECB communique. "The incoming information and the latest staff projections indicate that the disinflation process remains well on track." " Looking to the future, in the current environment of elevated uncertainty, it is prudent to maintain agility on a meeting-by-meeting basis and not pre-commit to any particular rate path".
ECB (RTRS): ECB's Wunsch Says Weaker Euro May Take Edge Off US Tariffs
A weaker euro falling to parity with the dollar would cushion the impact of any new U.S. tariffs on euro zone growth although it would push up inflation, European Central Bank policymaker Pierre Wunsch told Reuters on Wednesday. The Belgian central bank governor said in an interview with the Reuters Global Markets Forum that market bets on four more ECB rate cuts next year were a "meaningful" scenario, but he was open to taking a different path should inflation and growth data require it.
EU/RUSSIA (MNI): Ukraine Membership Talks Possible in Early 2025 - VdL
Ahead of two days of high-profile EU summits, wires report comments from European Commission President Ursula von der Leyen. She, along with NATO Secretary General Mark Rutte, German Chancellor Olaf Scholz, Italian PM Giorgia Meloni, Polish PM Donald Tusk, UK Foreign Secretary David Lammy, and European Council President Antnio Costa, will hold a dinner with Ukrainian President Volodymyr Zelenskyy in Brussels later this evening.
FRANCE (MNI): No Schedule for New Gov't as Macron to Visit Mayotte
There is still no schedule for PM Francois Bayrou to name the parties that will form his new administration or the individuals that will sit in his Council of Ministers. Bayrou is under pressure to announce his picks as soon as possible in order to seek to kick-start the French political system out of its current stasis. Le Monde reports that "proposals for names were made yesterday at noon", the president of the MoDem group [Bayrou's party] in the National Assembly, Marc Fesneau, announced on TF1 on Wednesday morning. "The discussions are still very advanced", he added, considering that there is a "need for teams to be able to be formed in the ministries before Christmas..."
RUSSIA/UKRAINE (BBG): Russia Detains Suspect in Killing of General, Blames Ukraine
Russian authorities detained an Uzbekistan national on suspicion of killing a top general in a Moscow bomb attack, and said he’d been recruited by Ukrainian security services to carry out the assassination. The detainee was promised $100,000 and safe passage to a European country if he helped plant the explosive device that killed Lieutenant General Igor Kirillov, the head of Russia’s radiological, chemical and biological defense forces, the Investigative Committee in Moscow said in a statement Wednesday on Telegram.
CANADA (MNI): Trudeau Jokes About Family Spats Amid Calls to Quit
Canadian Prime Minister Justin Trudeau on Tuesday joked about his finance minister's resignation a day earlier when Chrystia Freeland refused to introduce a fiscal plan she said contained gimmicks and failed to prepare for a potential U.S. trade war, signaling he's keen to fight the next election as other lawmakers say he must step aside. “Like most families, sometimes we have fights around the holidays,” he noted during a televised speech at a holiday staff party. “Like most families, we find our way through it.”
CHINA (MNI): PBOC Warns Market on Bond Rally - Press
MNI (Beijing) The People’s Bank of China summoned financial institutions on Wednesday to warn of investment risks as China’s long-term treasury yields slumped to a record low this month. According to the central bank run Financial News, the Bank asked institutions that had traded aggressively in the bond market rally this month to monitor their interest-rate risks and strengthen “the prudence of bond investments".
BRAZIL (BBG): Lula Sees His Fiscal Plan Weakened in Brazil Lower House Vote
Brazil’s lower house approved the first part of President Luiz Inacio Lula da Silva’s plan to target 70 billion reais ($11.5 billion) in spending with changes that water down some efforts to address investors’ concerns over the country’s public accounts. Lawmakers late Tuesday gave the green light to a proposal that prohibits the expansion of tax benefits if public finances are worsening, limits increased spending for civil servants and allows the government to block the use of public funds earmarked by legislators for local projects.
THAILAND (BBG): Bank of Thailand Defies Government Over Rates, Seeing Risks
Thailand’s central bank left its key interest rate unchanged after a surprise cut in October, warning of rising future uncertainties as it resists government calls for further policy easing. The Monetary Policy Committee voted unanimously to keep the one-day repurchase rate steady at 2.25% at Wednesday’s meeting, a decision expected by 21 of the 23 economists surveyed by Bloomberg. The baht was little changed by the decision, which came shortly before neighboring Indonesia held its main rate unchanged at 6%.
INDONESIA (BBG): Indonesia Holds Key Rate to Bolster Falling Rupiah Currency
Indonesia’s central bank kept its key interest rate unchanged for a third straight month to support the rupiah that fell past the key support level of 16,000 to the dollar. Bank Indonesia kept the benchmark BI-Rate steady at 6% on Wednesday, in line with the prediction of 21 of 34 economists surveyed by Bloomberg. The rest expected a cut of 25 basis points.
DATA
UK DATA (MNI): UK Inflation at 8-Month High Ahead of BOE Decision
- UK NOV CPI +0.1% M/M, +2.6% Y/Y
- UK NOV CORE CPI +0% M/M, +3.5% Y/Y
- UK NOV SERVICES CPI -0.1% M/M, +5% Y/Y
- UK NOV RPI +0.1% M/M, +3.6% Y/Y
UK inflation re-accelerated in November, climbing to 2.6% from 2.3% in October, the Office for National Statistics said Wednesday. Core CPI rose by 3.5% in the year to November, up from 3.3% in October. The CPI goods annual rate rose from negative 0.3% to positive 0.4%, while the CPI services annual rate was unchanged at 5.0%
“Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago," ONS Chief Economist Grant Fitzner said.
JAPAN DATA (MNI): Japan Nov Exports Post Second Straight Rise
- JAPAN NOV EXPORTS +3.8% Y/Y; SEPT +3.1%
- JAPAN POSTS JPY117.6 BLN TRADE DEFICIT IN NOV
Japan’s exports posted their second straight rise in November, up 3.8% vs. 3.1% in October, thanks to the 32.1% increase of semiconductor manufacturing equipment orders, down from 42.6%, and despite declining automobile shipments, which dropped 5.2% from the prior month's 0.9% decrease, data released by the Ministry of Finance showed on Wednesday. The data was largely within the Bank of Japan’s latest assessment that exports have been more or less flat. Imports fell 3.8% y/y in November for the first drop in eight months following +0.4% in October.
JAPAN DATA (MNI): Japan H’hold Assets at JPY2,179 Trln End-Sept
The balance of financial assets held by Japanese households stood at JPY2,179 trillion at the end of September, up 2.8% y/y and for the 18th straight quarterly rise, preliminary fund circulation data released by the Bank of Japan on Wednesday showed. But the balance of households’ financial assets at the end of September posted the first quarterly drop in eight quarters. The balance of cash and deposits held by Japanese households at the end of September stood at JPY1,116 trillion, up 0.3% from a year earlier.
CENTRAL BANK PREVIEWS
MNI FED PREVIEW - DECEMBER 2024: Greater Caution, Flatter Rate Path
The latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) on Dec 18, but macro and political developments have heightened uncertainty over its the next moves. With the unemployment rate likely to undershoot September’s median projection along with core PCE inflation and GDP growth overshooting, the FOMC will undoubtedly signal a more cautious approach to easing. This will be communicated most clearly in the updated Dot Plot, which is set to show 75bp of cuts in 2025.
MNI BOJ PREVIEW - DECEMBER 2024: Pushing Further Tightening Into 2025
The broad consensus for the BoJ policy meeting outcome on Thursday is for no changes in policy settings. Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
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.
MNI RIKSBANK PREVIEW - DECEMBER 2024: Still Cutting for Now
The Riksbank is expected to bring its policy rate to 2.50% with a 25bp cut in December. Although inflation has tracked a little above the September MPR projections over the past three months, continued softness in domestic economic activity means there is little reason for the Executive Board to go against its November guidance. The December decision includes an updated monetary policy report and rate path projection.
MNI NORGES BANK PREVIEW - DECEMBER 2024: Cuts Are Approaching
Norges Bank has signalled since September that policy rates will likely be kept at 4.50% through the end of 2024. As such, anything other than another hold in rates would be a significant surprise to markets. The September MPR rate path assigned a near-certain implied probability of a 25bp cut in Q1 2025, so it won’t be a surprise for Norges Bank to signal such an intention in the December policy statement.
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.
MNI BSP PREVIEW - DECEMBER 2024: Soft Inflation Should See a Cut
The Philippines economy is showing resilience in the face of some mixed signals from their regional neighbours, yet there is one data release that will hold the most weight with the BSP decision this week: that being the CPI. The BSP has a CPI target for 2024 of 3.00% +/- 1% and whilst November saw a slight increase to +2.5% (from +2.3% in October) the benign inflation environment provides an opportunity to cut at a time when regional uncertainty is growing.
FOREX: Greenback Eyes Monthly Highs Ahead of Fed Decision
- The Fed decision later today marks the halfway point of the last full week for markets of 2024, at which the FOMC are expected to proceed with a further 25bps rate cut. The market is set to focus not on today's decision itself, but on the messaging and communication for the path of policy across 2025, via the policy statement, Powell's press conference and the dot plot.
- Ahead of the decision, the greenback is firmer, but only modestly so - with price action largely contained and recent ranges respected. The USD Index remains at the upper-end of the December range, making 107.19 the bull trigger, above which the USD eyes the best levels seen since the Presidential election at 108.071.
- Elsewhere, the EUR trades well, recovering a small part of recent weakness, aided higher by demand in the crosses: EUR/AUD has broken to a new monthly high and cleared resistance at the early November print of 1.6601. For now, 1.6648 is holding, but clearance of that mark will be the highest EUR/AUD print since August.
- GBP has slipped against most others as both core and services CPI came in modestly below expectations. As a result, markets have shrugged off the inline headline read, which should have little bearing on the thinking of the MPC.
- Outside of the Fed decision, US housing starts and building permits data are set to cross.
EGBS: Bund Futures Off Highs; German Curve Twist Steepens
Bund futures have moved away from session highs but have traded in a tight 30 tick range this morning. Futures are currently -30 ticks at 134.54, with initial support at 134.39 (Dec 13 low).
- The current bearish cycle in Bund futures remains in play and the contract continues to trade closer to its recent lows. Sights are on 133.98, a Fibonacci retracement point. Clearance of this level would strengthen the current downleg.
- ECB’s Chief Economist Lane’s webcast with MNI has concluded. His remarks were generally not market moving.
- Eurozone November Final HICP was revised down a tenth from the rounded flash reading on an annual basis to 2.2%Y/Y from 2.3%Y/Y - unrounded this was a smaller -0.04 revision to 2.24% Y/Y (vs 2.28% flash, 2.00% prior).
- The German cash curve has twist steepened, with 2-year yields 1bp lower and 30-year yields 3bps higher. German swap spreads have narrowed month-to-date, with the long end leading the move.
- The 10-year OAT/Bund spread remains above 80bps. There is still no schedule for PM Francois Bayrou to name the parties that will form his new administration or the individuals that will sit in his Council of Ministers.
- 10-year peripheral spreads to Bunds are also biased a little wider today.
- Broader macro focus remains on the FOMC decision later this evening.
GILTS: Under Pressure as Modest CPI Rally Gives Way
Gilts fade the initial CPI-driven bid, as bearish technicals reassert themselves and oil ticks higher.
- Gilt futures through round number support at 93.00, last 92.90.
- Next support at a Fibonacci projection (92.78).
- Yields 0.5bp lower to 2bp higher, curve twist steepens.
- 30s consolidating the recent break break above 5.00%. Benchmark still ~15bp below ’23 highs, last 5.06%.
- 10s last 4.54%, November 14 high (4.566%) still untested.
- Early outperformance vs. Bunds fades, spread now only 0.5bp narrower on the day at 228.7bp. Yesterday saw the highest close for the spread since 1990.
- SONIA Dec ’25 BoE dated OIS/SFIZ5 futures operate around recent hawkish extremes with today’s inline to marginally softer-than-expected CPI data having little lasting impact, likely as the “surprises” within the data shouldn’t have too much of a bearing on monetary policy.
- BoE-dated OIS prices 55bp of cuts through ’25.
- SFIZ5 a little above triple bottom support that was printed in early to mid-November.
- Macro and cross-market cues set to dominate during the remainder of the day.
- Final ’24 BoE decision due tomorrow, click for our full preview.
EQUITIES: Recent Shallow Pullback in E-Mini S&P Considered Corrective
A bull cycle in the Eurostoxx 50 futures contract remains intact and the latest pullback is - for now - considered corrective. The contract has recently traded through the 50-day EMA. The clear break of this average strengthens a bullish theme and note that 4961.00, the Nov 6 high, has also been cleared. A resumption of gains would open 5015.00 next, the Oct 29 high. Initial support to watch lies at 4895.65, the 50-day EMA. The S&P E-Minis outlook remains bullish and the latest shallow pullback is considered corrective and marks a pause in the uptrend. Recent gains confirmed a resumption of the trend. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. A continuation higher would open 6194.19, a Fibonacci projection. Initial support to watch lies at 6105.41, the 20-day EMA.
- Japan's NIKKEI closed lower by 282.97 pts or -0.72% at 39081.71 and the TOPIX ended 8.33 pts lower or -0.31% at 2719.87.
- Elsewhere, in China the SHANGHAI closed higher by 20.723 pts or +0.62% at 3382.208 and the HANG SENG ended 164.07 pts higher or +0.83% at 19864.55.
- Across Europe, Germany's DAX trades higher by 20.9 pts or +0.1% at 20264.83, FTSE 100 higher by 35.5 pts or +0.43% at 8230.75, CAC 40 up 19.43 pts or +0.26% at 7385.19 and Euro Stoxx 50 up 9.65 pts or +0.2% at 4952.26.
- Dow Jones mini up 64 pts or +0.15% at 43538, S&P 500 mini up 11 pts or +0.18% at 6064.75, NASDAQ mini up 35.75 pts or +0.16% at 22049.5.
Time: 09:50 GMT
COMMODITIES: WTI Futures Recover From Monday's 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 is unchanged and continues to trade below its recent highs. Trend signals are bullish and a move lower is considered corrective. A key short-term resistance at $2721.4, Nov 25 high, has recently been pierced and this represents a positive development. A resumption of gains would expose key resistance at $2790.1, the Oct 31 high. Clearance of this level would resume the primary uptrend. First key support is $2605.3, the Nov 26 low.
- WTI Crude up $0.51 or +0.73% at $70.59
- Natural Gas up $0.02 or +0.6% at $3.327
- Gold spot up $1.2 or +0.05% at $2648
- Copper down $0.55 or -0.13% at $414.15
- Silver down $0.13 or -0.42% at $30.4145
- Platinum down $6.53 or -0.69% at $935.31
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 18/12/2024 | 1100/1100 | ** |  GB | CBI Industrial Trends |
| 18/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 18/12/2024 | 1330/0830 | * | US | Current Account Balance |
| 18/12/2024 | 1330/0830 | *** | US | Housing Starts |
| 18/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 18/12/2024 | 1900/1400 | *** | US | FOMC Statement |
| 19/12/2024 | 2145/1045 | *** |  NZ | GDP |
| 19/12/2024 | - |  NO | NorgesBank Meeting | |
| 19/12/2024 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |
| 19/12/2024 | 0300/1200 | *** |  JP | BOJ Policy Rate Announcement |
| 19/12/2024 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 19/12/2024 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 19/12/2024 | 0830/0930 | *** |  SE | Riksbank Interest Rate Decison |
| 19/12/2024 | 0900/1000 | *** | NO | Norges Bank Rate Decision |
| 19/12/2024 | 0900/1000 | ** |  EU | EZ Current Account |
| 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 |