MNI China Daily Summary: Wednesday, December 11

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MNI BRIEF: Brazil Not Even Close To Fiscal Dominance - David

CORRECTED-MNI BRIEF: Brazil Inflation Rises To 4.87% In Nov

EZ/UK Bond Supply Calendar: 4.25% Jul-34 Gilt Due Wednesday

EZ/UK T-Bill Calendar: 12-Month BOT Auction on Wednesday

MNI: JAPAN NOV CORP GOODS PRICE INDEX +3.7% Y/Y; OCT REV +3.6%

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

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While EUR Vols Have Crept Higher, ECB Impact Seen More Muted Relative to US CPI, NFP

OPTIONS
  • Despite broad consensus for no change at today’s ECB decision, EUR overnight vols have crept higher, with EUR/GBP implied nearing the best levels of 2024 having printed just over 8 points. This equates to markets pricing a ~25 pip swing in the cross over the course of the decision – a move which would bring yesterday’s lows of 0.8536 into contention in the event of EUR weakness. A weaker EUR into the Thursday NY cut would put the E300mln expiry at 0.8500 into play.
  • In relative terms, the vol premium being priced into EUR/USD, however, is shy of levels seen ahead of both the Nonfarm payrolls and US CPI releases this January – suggesting markets anticipate more muted market fallout to Lagarde’s press conference today.
  • The pricing out of ECB rate cuts in Q1 (an April 25bps cut is now roughly 50/50 having been fully priced as recently as early last week) has worked in favour of EUR option dynamics, with the 3m EUR/GBP risk reversal improving off mid-Jan lows and potentially concluding the downtrend off the Jun’23 high.
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