EXECUTIVE SUMMARY
- ISRAELI OFFICIALS DENY DRAFT CEASEFIRE REPORTS
- ECB TO ENSURE RATES FOLLOW MIDDLE PATH - LANE
- PBOC TO CUT RATES, RRR FOR ECONOMY - PAN
- CHINA EXPORTS END 2024 FIRMER, BUT UNCERTAIN 2025 OUTLOOK
Figure 1: USD/INR rallies sharply to fresh record highs
Source: MNI/Bloomberg
NEWS
ISRAEL (MNI): 'Breakthrough' in Gaza Ceasefire Talks - RTRS
Reuters reports that a breakthrough has been reached in Doha following talks between Israeli security and policy chiefs, US President-elect Donald Trump's Middle East envoy Steven Witkoff and Qatari PM and Foreign Minister Sheikh Mohammed bin Abdul Rahman Al Thani. Claims that a 'final' draft of a Gaza ceasefire and hostage release deal has been sent to Israel and Hamas for approval. The official claims that the Qatari PM met with representatives from Hamas while Witkoff met with the Israeli delegation in an effort to push both sides towards a deal.
Israel's N12 reports the deal is largely similar to the three-stage agreement put forward by the Biden administration in May. This would see 34 hostages defined as 'humanitarians' released, followed by discussions on the second stage from the 16th day of the ceasefire including returning young men and soldiers. The third stage will see broader talks on governing Gaza and reconstruction.
ISRAEL (MNI): Officials Deny Draft Ceasefire Reports as Smotrich Blasts Prospective Deal
Finance Minister Bezalel Smotrich has pushed back against earlier reports of a potential 'final draft' for a ceasefire between Israel and Hamas in Gaza. Smotrich, who leads the ultranationalist National Religious Party–Religious Zionism party, said that his party “will not be part of” such a deal, claiming that it would be a “catastrophe for Israel’s national security.” Reuters reports that Israeli officials have denied receipt of a draft ceasefire proposal after Smotrich's statement.
US (BBG): Former Fed Vice Chair Sees No Risk to Fed Autonomy Under Trump
The Federal Reserve’s independence won’t be in jeopardy once President-elect Donald Trump takes office, neither are inflation and the labor market, according to former Federal Reserve Vice Chair Randal Quarles. “There’s a fair bit of misunderstanding about what Fed independence is. Fed independence doesn’t mean that the president can’t express a view on Fed policy,” Quarles, a Trump appointee to the Fed who served as vice chair of supervision until 2021, told Bloomberg Television’s Stephen Engle on the sidelines of a forum on Monday.
US/RUSSIA (MNI): No Specific Preparations Underway for Putin-Trump Meeting - Kremlin
Reuters reporting comments from Kremlin spokesperson Dmitry Peskov, stating that there are “no specific preparations” underway for a meeting between Russian President Vladimir Putin and US President-elect Donald Trump, appearing to counter Trump, who said at a press conference last week: “[Putin] wants to meet, and we are setting it up”. Peskov said on a potential Putin-Trump meeting: “There is only an understanding of the political will – we shall watch the situation.”
US/ASIA (BBG): US Secures Ties With Japan, Philippines Ahead of Trump Return
The US secured ties with key Asian allies Japan and the Philippines ahead of Donald Trump’s return to the White House, with President Joe Biden expressing optimism that a trilateral alliance will continue. Biden on Monday held a virtual meeting with Japan Prime Minister Ishiba Shigeru and Philippine President Ferdinand Marcos Jr., where they pledged to sustain economic, maritime and technology cooperation.
ECB (MNI): ECB to Ensure Rates Follow Middle Path - Lane
The European Central Bank needs to ensure that interest rates “follow a middle path” of being “neither too aggressive nor too cautious”, ECB chief economist Philip Lane said in an interview with dm. The ECB has to be attentive that rates don’t fall too quickly as “it will be difficult to bring services inflation under control” and also they don’t remain too high for too long. Lane also said that energy prices will not bring down overall inflation like did in 2024 and that to reach 2% in a sustained way “there would need to be a further decline in services inflation”.
ECB (BBG): More ECB Rate Cuts Needed Irrespective of Fed Moves, Rehn Says
The European Central Bank should continue lowering borrowing costs irrespective of what the US Federal Reserve does, according to Governing Council member Olli Rehn. “Against the backdrop of disinflation being on track and the growth outlook having weakened it makes sense to continue rate cuts,” the Finnish official told Bloomberg TV. “The direction is clear, the scale and speed of rate cuts depends upon the incoming data.”
UK (FT): Keir Starmer Aims to Refocus Attention on Growth After Hit From Markets
Prime Minister Sir Keir Starmer has promised to make Britain “the best state partner” for artificial intelligence companies in the world, as he tries to boost UK growth prospects against an ominous economic and political backdrop. Starmer, writing for the Financial Times, claimed Britain’s “values of democracy, open commerce and the rule of law” made the UK a natural location for AI companies to invest, and vowed to sweep away planning restrictions and create new “AI growth zones”. “I am determined the UK will become the best place to start and scale an AI business,” he wrote on Monday. “I know growth in this area cannot be state led. But it is absolutely the job of government to make sure the right conditions are in place.”
CHINA (MNI): PBOC to Cut Rates, RRR for Economy - Pan
MNI (Beijing) The People’s Bank of China will reduce interest rates and the reserve requirement ratio to maintain ample liquidity and support financing of the economy, said Governor Pan Gongsheng on Monday in Hong Kong according to a statement on the PBOC’s website. The focus of China's macroeconomic policy will shift from an emphasis on investment to a more balanced approach with consumption, he said, noting efforts will be made to expand spending by increasing household income, enhancing consumption subsidies, innovating supply, and improving social security.
CHINA (MNI): PBOC to Add Forex Reserves Allocation in HK - Pan
MNI (Beijing) The People’s Bank of China will increase the allocation of its foreign exchange reserves in assets in Hong Kong and expand the HK-Mainland Connect schemes to support growth of financial markets, said Governor Pan Gongsheng on Monday according to the Bank’s website. The PBOC will support more high-quality enterprises to list and issue bonds in Hong Kong, and optimise Connect schemes in stocks, bonds, wealth management, and interest rate swaps, he said.
CHINA (MNI): PBOC to Raise Key Parameter for Shoring Up Yuan
MNI (Beijing) The People’s Bank of China raised a key parameter to unlock more foreign debt finance and encourage capital inflow on Monday to shore up the yuan.
According to the PBOC’s website, the Bank will work with the State Administration of Foreign Exchange, to raise the macro-prudential adjustment parameter for cross-border financing by enterprises and financial institutions from 1.5 to 1.75, effective Jan 13. The Bank last raised the parameter to 1.5 from 1.25 on July 20, 2023 when the yuan weakened against the dollar.
INDIA (MNI): Rupee Set for Worst Session in Over 2-Years, RBI Intervention Appears Limited
The rupee is set for its worst day in over 2 years, falling over 0.6% against the greenback during Monday’s session as rising oil prices weigh on the currency. USD/INR has spiked with the pair rising through 86.00 to around 86.50, fresh record highs, further evidence of greater FX volatility under the new central bank leadership. According to Reuters, a surge in the US dollar, likely outflows from local equities and limited intervention from the central bank have all contributed to the rupee’s slump.
DATA
CHINA DATA (MNI): Exports End 2024 Firmer, But Uncertain 2025 Outlook
- CHINA DEC TRADE SURPLUS +$104.84 BLN VS MEDIAN +$100.0 BLN
- CHINA DEC EXPORTS +10.7% Y/Y VS MEDIAN +7.4% Y/Y
- CHINA DEC IMPORTS +1.0% Y/Y VS MEDIAN -1.4% Y/Y
China Dec trade figures were better than expected. Exports rose 10.7% y/y against a 7.5% forecast 6.7% prior. Since a trough in March last year, exports have mostly been on a modestly improving trend. 2025 remains much more uncertain though, given the returning Trump administration to the White House Imports also beat expectations, up 1.0% y/y (versus -1.0% forecast and -3.9% prior. The trade surplus was near $105bn, against a $100bn forecast. On the export side, shipments to the US rose 15.7% y/y, up from 7.3% in Nov. In levels terms, exports to the US were the highest since Q3 2022.
CHINA DATA (MNI): China 2024 Oil Imports Down 1.9%
China imported 47.8 million metric tonnes of crude oil in December, down from 48.5 mmt in November, as total inbound shipments finished the year declining 1.9% y/y, data from the General Administration of Customs showed on Monday. Inbound shipments of copper ore and its concentrates reached 2.52 million tonnes last month, up from 2.25 million tonnes in November, bringing total import growth over January to December to 2.1% y/y, a deceleration from the 2.2% y/y during the first 11 months.
FOREX: GBPJPY Extends Decline as Weak Risk Sentiment Weighs
- The continued post-NFP themes of a weaker Euro and Pound have continued early Monday. Weak risk sentiment continues to boost the Japanese yen, prompting some significant declines for cross/JPY to start the week.
- EURUSD has traded below the 1.02 handle, registering fresh cycle lows for the pair at 1.0178. Higher European NatGas prices are providing additional single currency headwinds, as equity weakness particularly weighs on EURJPY, down 0.70% on the session with the 160.00 mark supporting for now.
- With the bearish EURUSD trend sequence intact, analysts will now look to 1.0138, the 1.764 projection of the Sep 25 - Oct 23 - Nov 5 price swing as the next target for the move.
- For sterling, 1.2100 has so far held for cable, however the pair is down 0.85% as the negative backdrop for UK assets continues to permeate. We highlighted last week how 190.60 was the first major target for the move in GBPJPY, a trendline drawn from the Aug low. This trendline has been pierced, with the pullback from the Dec 30 highs briefly extending to 4.5%. Given this development, 188.09 will now be in focus, the Dec 03 low.
- Overall, the USD index is up 0.3% since the open having printed a fresh two-year high above 110.00.
- US Federal Budget balance data highlights a light Monday schedule. US PPI will cross Tuesday before UK and US CPI data on Wednesday.
EGBS: Under Pressure, Spreads Wider
Core global FI markets remain under pressure.
- Bearish technicals and rallying energy prices weigh early this week.
- Bund futures as low as 130.57 before a recovery to 130.70.
- German yields 2-3bp higher, 5s lead the move.
- 10s near their July high (2.642%), that level equates to 130.50 in futures today.
- Weakness in core global FI & European equities promotes EGB spread widening
- BTP/Bunds ~5bp wider at 122.5bp, eying the early December closing high (123.3bp). 3- & 7-Year BTP supply passed smoothly.
- OATs ~2bp wider vs. Bunds, 85bp caps for now. ’24 cycle closing highs at 88.4bp lie above. Participants eye French PM Bayrou’s inaugural speech to parliament, due Tuesday.
- GGBs widen by ~4.5p vs. Bunds, unwinding some of their early ’25 outperformance.
- No real sign of underperformance for 10-Year RAGBs this morning, despite the negative ratings outlook move from Fitch on Friday as Austrian fiscal & political headwinds are well-documented. Spread to Bunds +1bp.
- Little of note in ECB speak from Lane, Rehn & Vujcic. Vujcic seemingly remains more cautious when it comes to cuts, while Lane & Rehn stuck to the central ECB view.
- ECB-dated OIS price 88bp of cuts through year-end vs. ~92bp late Friday.
- Cross-market cues eyed for the remainder of the day, with little of note on the European calendar.
GILTS: Recoveries Remain Shallow
Gilts remain under pressure, with Chancellor Reeves’ weekend comments doing little to promote confidence.
- Futures breach initial support at last week’s low (89.00), basing at 88.96, before a bounce to 89.25 last.
- Yields little changed to 4bp higher, 50s relatively resolute.
- 10s as high as 4.901% this morning vs. last week’s high of 4.921%.
- 30s got near last week’s multi-decade high (5.473%), topping out at 5.469%.
- 10-Year gilt/Bunds little changed on the day, around 225bp.
- BoE-dated OIS shows 46bp of cuts through year-end vs. 49bp late on Friday. Last week’s extremes of ~39bp untested.
- SONIA futures 0.5-5.5 lower, last week’s lows intact.
- GBP750mln of short-dated APF sales from the BoE due this afternoon.
- CPI data (Wednesday) headlines the domestic calendar this week. That reading will be much more consequential for markets than the monthly GDP (Thursday) and retail sales (Friday) data.
- We will provide the usual data preview and review around the CPI release.
- Comments from BoE dovish dissenter Taylor (Wednesday) also eyed.
EQUITIES: Bear Threat in E-Mini S&P Remains Present, Next Support at $5811.65
A bull cycle in the Eurostoxx 50 futures contract remains intact and price is trading closer to its recent highs. Last week’s rally highlights a reversal of the recent corrective pullback. Resistance at 5040.00, the Dec 9 high, has been pierced. A clear break of this hurdle would confirm a resumption of the bull cycle that started on Nov 21 and open 5068.13, a Fibonacci projection. On the downside, initial firm support lies at 4935.71, the 50-day EMA. A bear threat in the S&P E-Minis contract remains present and the contract is trading lower today. The reversal from the Dec 26 high, confirms the end of the Dec 20 - 26 correction. 5866.00, the Dec 20 low and a key short-term support, has been cleared. This strengthens a bearish theme and opens 5811.65, a Fibonacci retracement. Initial firm resistance is 6107.50, the Dec 26 high. First pivot resistance is seen at 5996.50, the 50-day EMA.
- Elsewhere, in China the SHANGHAI closed lower by 7.769 pts or -0.25% at 3160.755 and the HANG SENG ended 190.15 pts lower or -1% at 18874.14.
- Across Europe, Germany's DAX trades lower by 134.25 pts or -0.66% at 20078.74, FTSE 100 lower by 25.91 pts or -0.31% at 8221.77, CAC 40 down 49.25 pts or -0.66% at 7380.48 and Euro Stoxx 50 down 44.46 pts or -0.89% at 4931.57.
- Dow Jones mini down 138 pts or -0.33% at 42024, S&P 500 mini down 51 pts or -0.87% at 5814.75, NASDAQ mini down 282.5 pts or -1.34% at 20731.75.
Time: 09:50 GMT
COMMODITIES: WTI Futures Start the Week on the Front Foot, Trend Remains Bullish
The trend structure in WTI futures remains bullish and the contract is again trading higher, today. 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 $72.05. This average is seen as a key short-term support. Recent gains in Gold appear corrective - for now. However, the yellow metal is holding on to 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 short-term 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 $2642.1, the 50-day EMA.
- WTI Crude up $1.14 or +1.49% at $77.67
- Natural Gas up $0.19 or +4.66% at $4.179
- Gold spot down $4.93 or -0.18% at $2685.01
- Copper up $1.7 or +0.4% at $432.1
- Silver down $0.36 or -1.2% at $30.0535
- Platinum down $6.63 or -0.69% at $959.3
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 13/01/2025 | 1600/1100 | ** |  US | NY Fed Survey of Consumer Expectations |
| 13/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 13/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 13/01/2025 | 1900/1400 | ** | US | Treasury Budget |
| 14/01/2025 | 0500/1400 |  JP | Economy Watchers Survey | |
| 14/01/2025 | 0735/0835 |  EU | ECB's Lane speech on Europe, Asia and the Changing Globe | |
| 14/01/2025 | 0830/0830 |  GB | BOE's Breeden speech on Financial Stability | |
| 14/01/2025 | 0900/1000 | * |  IT | Industrial Production |
| 14/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 14/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 14/01/2025 | 1100/0600 | ** | US | NFIB Small Business Optimism Index |
| 14/01/2025 | - | *** |  CN | Money Supply |
| 14/01/2025 | - | *** | CN | Social Financing |
| 14/01/2025 | - | *** | CN | New Loans |
| 14/01/2025 | 1330/0830 | *** | US | PPI |
| 14/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 14/01/2025 | 1500/1000 | US | Fed's Schmid | |
| 14/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |