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MNI US OPEN - Norges Bank Deliver 25bp Hike Ahead of ECB, BOE
EXECUTIVE SUMMARY:
- MNI ECB PREVIEW - POLICY LIKELY UNCHANGED IN DECEMBER, RISKS OF COMMUNICATION SURPRISE
- MNI BOE PREVIEW - SAME AS NOVEMBER?
- NORGES BANK HIKES TO 4.5%, SIGNALS RATE PEAK
- SNB HOLDS RATES, CHANGES FX GUIDANCE AMID SLOWDOWN
- AUSSIE UNEMPLOYMENT HIGHER AT 3.9%
Figure 1: Norges Bank policy path projection shows higher peak
NEWS
MNI ECB PREVIEW - DECEMBER 2023: Policy Likely Unchanged in December, Risks of Communication Surprise
The ECB is unlikely to make any material changes to monetary policy at the December meeting. The sharp fall in inflation and weak economic activity is increasingly at odds with the ECB’s more cautious stance towards policy easing. We would expect the ECB to remain cautious for now with President Lagarde acknowledging the recent improvement in inflation, while stressing that discussion of near-term policy rate cuts are premature. The risk, however, is tilted in the direction of a dovish signal.
MNI BOE PREVIEW - DECEMBER 2023: Same as November?
There is a unanimous expectation amongst sell-side economists that the MPC will vote to keep Bank Rate on hold at 5.25% - with market pricing also endorsing this view and pricing a negligible chance of any other outcome. However, this week’s decision still has plenty to watch with the vote split and forward guidance likely to be the most obvious drivers of the initial market reaction. We discuss the main considerations of November's hawkish dissenters as well as whether Dhingra will vote for a cut. On balance (and despite the weak AWE numbers this morning) we still expect a 6-3 vote this week.
US (NYT): House Approves Biden Impeachment Inquiry as G.O.P. Hunts for an Offense
Republicans are pushing forward with a formal investigation even though their yearlong scrutiny of the president and his family has turned up no evidence of high crimes or misdemeanors. The House voted on Wednesday to formally open an impeachment inquiry into President Biden, pushing forward with a yearlong G.O.P. investigation that has failed to produce evidence of anything approaching high crimes or misdemeanors. Republicans said the vote was needed to give them full authority to continue carrying out their investigation amid anticipated legal challenges from the White House. Democrats have denounced the inquiry as a fishing expedition and a political stunt.
EUROPEAN COUNCIL (MNI): EUCO is Not in Position to Decide on Ukraine Membership - Orban
Delivering doorstep comments at the European Council summit in Brussels, Orban states that 'our stance will not change', and that the Council 'is not in a position to decide on Ukraine membership'. Orban: 'The money for Ukraine for the short-term is already in the budget'. States that he supports long-term financial aid to Ukraine outside of EU budget.' On Ukraine membership, Orban states that 'if you have not fulfilled conditions there is no chance to start talks on membership....It is not about bargains, not about deals.'
NORGES BANK (MNI): Norges Bank Hikes to 4.5%, Signals Rate Peak
Norges Bank hiked its policy rate by 25 basis points to 4.5% at its December meeting and stated that it then expected it to hold the rate steady "for some time to come. Analysts were divided ahead of the decision over whether the central bank's Monetary Policy and Financial Stability Committee would tighten further but it the event it cited risks of elevated inflation and chose to go for what is likely a final 25 bps hike with an extended period of flat rates, the high-for-long strategy.
SNB (MNI): SNB Holds Rates, Changes FX Guidance Amid Slowdown
The SNB kept its benchmark policy rate unchanged at 1.75% Thursday, and said it remains willing to be active in the foreign exchange market as necessary -- dropping it’s previous focus on selling foreign currency and its reference to further rate hikes. Inflation is likely to increase again somewhat in the coming months, the statement said. Yet unlike in September, it did not say that more hikes cannot be ruled out.
UK (MNI): PM Sunak to Remain Under Pressure as Another By-Election Looms
Prime Minister Rishi Sunak is set to remain under pressure into the new year following the likely suspension of an MP from his governing Conservative party that could result in another parliamentary by-election. The centre-right Conservatives have already lost four by-elections in 2023, and another loss in early 2024 could raise the prospect of Sunak facing a leadership challenge ahead of the next general election.
CHINA (BBG): Country Garden Staves Off Worsening of Debt Crisis With Payment
Chinese developer Country Garden Holdings Co. took steps to prevent its debt crisis from worsening, paying off a yuan note ahead of schedule and selling a stake in a mall operator. The distressed builder’s onshore unit, Country Garden Real Estate Group Co., repaid in full an 800 million yuan ($111 million) bond with a put option that expired Wednesday, it said in a filing to the Shenzhen Stock Exchange. It also sold an investment in Zhuhai Wanda Commercial Management Group Co. for 3.07 billion yuan to raise cash for offshore debt restructuring.
JAPAN (BBG): Japan’s Kishida Removes Ministers in Bid to Stay in Power
Japanese Prime Minister Fumio Kishida reshuffled his cabinet in an attempt to contain a funding scandal that threatens the future of his struggling government. The premier replaced four ministers Thursday who are among lawmakers accused of concealing income from fundraising events, including Chief Cabinet Secretary Hirokazu Matsuno and trade minister Yasutoshi Nishimura, who has been a key player in Japan’s efforts to revive its semiconductor industry.
JAPAN (BBG): Japan 20-Year Bond Sale Sees Weak Demand Before BOJ Meeting
Japan’s auction of 20-year government securities met weak investor appetite, sending a gauge of demand to the least since September 2022, as investors stay on the sidelines before the central bank’s monetary policy decision next week. The bid-to-cover ratio at the bond sale on Thursday fell to 2.58, compared with 3.54 at the prior offering on Nov. 21, amid expectations that the Bank of Japan is preparing to end the world’s last negative interest rate policy.
JAPAN (BBG): Japan to Use More Tax Incentives to Encourage Wage Increases
Japan’s Liberal Democratic Party and its coalition partner Komeito agreed to offer more tax incentives to companies that administer large wage increases, potentially helping to boost the nation’s chances of achieving the virtuous cycle of pay gains and inflation needed for the central bank to pare stimulus.
RUSSIA (WPT): Putin, Eyeing Reelection, Holds Annual News Conference and Call-in Show
With his armed forces still on the attack in Ukraine and a reelection campaign getting underway at home, Russian President Vladimir Putin addressed his nation Thursday in a marathon news conference and call-in show for constituents where he quickly declared that the war will continue until Russia achieves its aims. Conference moderators immediately turned to the war in Ukraine, asking Putin to address one of the most sensitive issues: military mobilization. Putin ruled out another conscription wave.
BSP (BBG): Philippine Central Bank Keeps Key Rate Steady, Stays Hawkish
The Philippine central bank left its benchmark interest rate unchanged for a second straight meeting as inflation slowed, even as policymakers retained their hawkish bias amid lingering risks to the price outlook. The Bangko Sentral ng Pilipinas maintained the target rate at 6.50% on Thursday, as seen by 23 of 24 economists surveyed by Bloomberg. One predicted a quarter-point increase. “The Monetary Board continues to see the need to keep monetary policy settings sufficiently tight to allow inflation expectations to settle more firmly within the target range,” Governor Eli Remolona said after the decision.
ARGENTINA (BBG): Argentina to Pay IMF Next Week, ‘Reformulate’ Deal, Caputo Says
Argentina will pay $912 million owed to the International Monetary Fund next week while it seeks to renegotiate the country’s $44 billion deal, according to Economy Minister Luis Caputo. In his first interview since taking office this week, Caputo said President Javier Milei’s administration will honor the upcoming repayment despite repeating in previous occasions that “there’s no more money.” He didn’t elaborate on changes the government would like to make to the IMF program, nor did he say where the funds to to make the Dec. 21 repayment will come from.
DATA
SWEDEN NOV CPIF +3.6% Y/Y (MNI)
JAPAN OCT CORE MACHINE ORDERS +0.7% M/M; SEPT +1.4% (MNI)
AUSTRALIA (MNI): Aussie Unemployment Higher at 3.9%
- AUSTRALIA NOV UNEMPLOYMENT RATE +3.9%
- AUSTRALIA NOV EMPLOYED PERSONS CHANGE 61.5K
- AUSTRALIA NOV F-T EMPLOYED PERSONS CHANGE 57K
- AUSTRALIA NOV LABOR PARTICIPATION RATE +67.2%
Australia’s unemployment rate rose 0.1 percentage point to 3.9% in November, while employment grew 61,500 up from October’s 55,000, according to data released today by the Australian Bureau of Statistics. “We have continued to see employment growth keeping pace with high population growth through 2023,” said Bjorn Jarvis, head of labour statistics at the ABS. The bureau noted the employment-to-population ratio has remained between 64.4-64.6% since February 2023, and between 64.3-64.6 per cent for the past 18 months.
AUSTRALIA DATA (MNI): Expectations Ease and Signal Further Inflation Moderation in Q4
Melbourne Institute consumer inflation expectations eased to 4.5% in December from 4.9%, the lowest since January 2022. The result is not surprising given the almost 8% drop in national petrol prices since mid-November, the larger than expected moderation in the October CPI (which received a lot of press coverage), and the RBA on hold at the start of December. While inflation was the main concern of households in the latest Westpac survey, the RBA will be pleased to see expectations continuing to trend lower. Q4 CPI on January 31 will be key to the February meeting outcome, and the MI data suggests it should moderate further.
FOREX: Markets Built on Post-Fed USD Losses
- Dollar weakness pervades further after the Fed decision, with the reaction extending into early Thursday trade. EUR/USD has shown above $1.0900 handle for the first time since early December, adding to gains following the close above the 200-dma yesterday.
- USD/JPY holds the entirety of the post-Fed losses, tipping the pair through the 141.71 post-Ueda lows and looking to cement weakness through 141.52 support. Next key support undercuts at 140.71, the 76.4% Jul - Nov upleg.
- The NOK trades sharply higher after the Norges Bank took a large part of the market by surprise in hiking rates by a further 25bps to 4.50%. While the bank subsequently signaled that this will mark a peak for the policy rate, a large number of sell-side analysts saw no change today, meaning the NOK was marked sharply higher.
- EUR/NOK traded lower by as much as 3% on the initial decision, piercing key support at both the 100- and 200-dma to print the lowest level since early October.
- The SNB decision also prompted a spell of volatility. While rates were held unchanged, the decision to omit the bias for selling foreign currency drew some focus, although EUR/CHF trades broadly inline with pre-decision levels headed into the NY crossover.
- Focus remains on central banks, with both the Bank of England and European Central Bank decisions ahead. While neither bank is expected to change headline policy, ample market focus will be on any communications for rates ahead, with hefty rate cuts already well-priced in for 2024.
BONDS: Post-Fed Dovish Repricing Promotes Bull Steepening, ECB & BoE Up Next
Post-Fed repricing has dominated when it comes to early Thursday European bond trading. Core FI is a little shy of best levels but still comfortably firmer on the day.
- The European short end now shows ~160bp of ECB cuts through ’24, registering a fresh cycle extreme. The strip prices a little over 20bp of easing come the end of the Mar ’24 meeting.
- Bund futures are +120 ticks on the day, ~40 ticks shy of their session peak. German cash yields run 5-16bp lower, bull steepening. Bund futures broke through initial technical resistance levels, but 10-Year yields failed to challenge the 2.00% mark, bottoming at 2.029%, for now.
- Spreads to Bunds are generally tighter across the EGB space, with BTPs/peripherals outperforming on the dovish repricing of global central bank expectations.
- Many sell-side names have suggested that “well-behaved” peripheral spreads and the degree of monetary easing priced in provides a much more fertile ground for PEPP QT adjustment discussions, particularly in the wake of President Lagarde’s recent loose guidance re: the timeline for such talks. A reminder that no changes in ECB rates are seen today.
- BoE-dated OIS shows just under 120bp of cuts during ’24, with the first 25bp cut fully discounted come the end of the May ’24 MPC. The strip briefly priced 125bp of cuts (i.e. 5x 25bp moves) through ’24 at one stage. Cash yields are 7.5-18.5bp lower on the day, with the curve bull steepening. Gilt futures run +120, ~40 ticks shy of best levels.
- Focus re: today’s BoE decision is set to fall on the vote split and guidance verse.
EQUITIES: E-Mini S&P Holds Onto Post-Fed Gains, Targets $4800 Next
A bullish theme in Eurostoxx 50 futures remains intact and the contract has traded to a fresh trend high today. This confirms, once again, a resumption of the uptrend and maintains a bullish price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position too, signalling a rising cycle. The focus is on 4608.00, the Jun 2007 high and a key resistance. Support to watch is at 4423.00, the 20-day EMA. A bullish theme in S&P e-minis remains intact and the contract traded sharply higher yesterday. Price is firmer again today and confirms a resumption of the uptrend that started Oct 27. Note too that the contract has cleared resistance at 4738.50, the Jul 27 high, reinforcing current positive trend conditions. This signals scope for a climb towards 4800.00 next. On the downside, initial firm support lies at 4617.32, the 20-day EMA.
- Japan's NIKKEI closed lower by 240.1 pts or -0.73% at 32686.25 and the TOPIX ended 33.57 pts lower or -1.43% at 2321.35.
- Elsewhere, in China the SHANGHAI closed lower by 9.774 pts or -0.33% at 2958.986 and the HANG SENG ended 173.44 pts higher or +1.07% at 16402.19.
- Across Europe, Germany's DAX trades higher by 118.42 pts or +0.71% at 16882.87, FTSE 100 higher by 143.77 pts or +1.9% at 7691.62, CAC 40 up 71.52 pts or +0.95% at 7602.66 and Euro Stoxx 50 up 34.34 pts or +0.76% at 4564.89.
- Dow Jones mini up 34 pts or +0.09% at 37148, S&P 500 mini up 6.75 pts or +0.14% at 4715.75, NASDAQ mini up 49 pts or +0.3% at 16614.
COMMODITIES: Gold Rally Wednesday Signals Short-Term Reversal
Bearish conditions in WTI futures remain intact and Tuesday’s sell-off reinforced this condition. The contract has cleared $68.80, the Dec 7 low, to confirm a resumption of the downtrend. This maintains the price sequence of lower lows and lower highs and note that moving average studies are in a bear-mode position, highlighting a downtrend. The focus is on $67.28, the Jun 23 low. Key short-term resistance is at $71.96, the Dec 12 high. Gold traded sharply higher yesterday. This signals a short-term reversal and the end of the recent Dec 4 - 13 corrective pullback. Moving average studies remain in a bull-mode position, highlighting an uptrend. A continuation higher would signal scope for a climb toward key resistance and the Dec 4 all-time high of $2135.39. A break of this level would confirm a resumption of the primary bull trend. Initial firm support lies at $1973.2, yesterday’s low.
- WTI Crude up $1 or +1.44% at $70.37
- Natural Gas up $0.01 or +0.56% at $2.343
- Gold spot up $8.46 or +0.42% at $2036.12
- Copper up $9.15 or +2.42% at $388.1
- Silver up $0.21 or +0.86% at $24.003
- Platinum up $8.1 or +0.86% at $946.73
Date | GMT/Local | Impact | Flag | Country | Event |
14/12/2023 | 1200/1200 | *** | ![]() | UK | Bank Of England Interest Rate |
14/12/2023 | 1230/1230 | ![]() | UK | MPR Press Conference MPR Press Conference | |
14/12/2023 | 1315/1415 | *** | ![]() | EU | ECB Deposit Rate |
14/12/2023 | 1315/1415 | *** | ![]() | EU | ECB Marginal Lending Rate |
14/12/2023 | 1315/1415 | *** | ![]() | EU | ECB Main Refi Rate |
14/12/2023 | 1330/0830 | *** | ![]() | US | Jobless Claims |
14/12/2023 | 1330/0830 | ** | ![]() | US | WASDE Weekly Import/Export |
14/12/2023 | 1330/0830 | ** | ![]() | CA | Monthly Survey of Manufacturing |
14/12/2023 | 1330/0830 | *** | ![]() | US | Retail Sales |
14/12/2023 | 1330/0830 | ** | ![]() | US | Import/Export Price Index |
14/12/2023 | 1345/1445 | ![]() | EU | ECB Monetary Policy Press Conference | |
14/12/2023 | 1400/0900 | * | ![]() | CA | CREA Existing Home Sales |
14/12/2023 | 1500/1000 | * | ![]() | US | Business Inventories |
14/12/2023 | 1515/1615 | ![]() | EU | ECB Lagarde participates in MP Podcast | |
14/12/2023 | 1530/1030 | ** | ![]() | US | Natural Gas Stocks |
14/12/2023 | 1630/1130 | * | ![]() | US | US Bill 08 Week Treasury Auction Result |
14/12/2023 | 1630/1130 | ** | ![]() | US | US Bill 04 Week Treasury Auction Result |
14/12/2023 | 1900/1400 | *** | ![]() | MX | Mexico Interest Rate |
15/12/2023 | 2200/0900 | *** | ![]() | AU | Judo Bank Flash Australia PMI |
15/12/2023 | 0001/0001 | ** | ![]() | UK | Gfk Monthly Consumer Confidence |
15/12/2023 | 0030/0930 | ** | ![]() | JP | Jibun Bank Flash Japan PMI |
15/12/2023 | 0200/1000 | *** | ![]() | CN | Fixed-Asset Investment |
15/12/2023 | 0200/1000 | *** | ![]() | CN | Retail Sales |
15/12/2023 | 0200/1000 | *** | ![]() | CN | Industrial Output |
15/12/2023 | 0200/1000 | ** | ![]() | CN | Surveyed Unemployment Rate M/M |
15/12/2023 | 0700/0800 | ** | ![]() | SE | Unemployment |
15/12/2023 | 0745/0845 | *** | ![]() | FR | HICP (f) |
15/12/2023 | 0815/0915 | ** | ![]() | FR | S&P Global Services PMI (p) |
15/12/2023 | 0815/0915 | ** | ![]() | FR | S&P Global Manufacturing PMI (p) |
15/12/2023 | 0830/0930 | ** | ![]() | DE | S&P Global Services PMI (p) |
15/12/2023 | 0830/0930 | ** | ![]() | DE | S&P Global Manufacturing PMI (p) |
15/12/2023 | 0900/1000 | ** | ![]() | IT | Italy Final HICP |
15/12/2023 | 0900/1000 | ** | ![]() | EU | S&P Global Services PMI (p) |
15/12/2023 | 0900/1000 | ** | ![]() | EU | S&P Global Manufacturing PMI (p) |
15/12/2023 | 0900/1000 | ** | ![]() | EU | S&P Global Composite PMI (p) |
15/12/2023 | 0930/0930 | *** | ![]() | UK | S&P Global Manufacturing PMI flash |
15/12/2023 | 0930/0930 | *** | ![]() | UK | S&P Global Services PMI flash |
15/12/2023 | 0930/0930 | *** | ![]() | UK | S&P Global Composite PMI flash |
15/12/2023 | 1000/1100 | * | ![]() | EU | Trade Balance |
15/12/2023 | 1000/1000 | ![]() | UK | BOE's Ramsden Speech at Deloitte on Bank resolution regime | |
15/12/2023 | 1315/0815 | ** | ![]() | CA | CMHC Housing Starts |
15/12/2023 | 1330/0830 | * | ![]() | CA | International Canadian Transaction in Securities |
15/12/2023 | 1330/0830 | ** | ![]() | CA | Wholesale Trade |
15/12/2023 | 1330/0830 | ** | ![]() | US | Empire State Manufacturing Survey |
15/12/2023 | 1415/0915 | *** | ![]() | US | Industrial Production |
15/12/2023 | 1445/0945 | *** | ![]() | US | IHS Markit Manufacturing Index (flash) |
15/12/2023 | 1445/0945 | *** | ![]() | US | S&P Global Services Index (flash) |
15/12/2023 | 1630/1630 | ![]() | UK | BoE announce APF Sales schedule for Q124 | |
15/12/2023 | 1725/1225 | ![]() | CA | BOC Governor Macklem speech/press conference | |
15/12/2023 | 1800/1300 | ** | ![]() | US | Baker Hughes Rig Count Overview - Weekly |
15/12/2023 | 2100/1600 | ** | ![]() | US | TICS |
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.