US: Deficit Hawks Warn Against Debt Limit Hike Ahead Of Key Trump Meetings
Axios reports that a handful of deficit hawks from the House Freedom Caucus could sink the entire Republican agenda if House Speaker Mike Johnson (R-LA) follows through with plans to attach a debt ceiling hike to a huge multi-item reconciliation bill.
- Axios notes that Reps. Andy Biggs (R-AZ) and Tim Burchett (R-TN) "have never voted to increase the debt ceiling," with Rep. Rich McCormick (R-GA) noting: "I heard that there are three people that will not vote for a debt ceiling lift, which already kills the bill,"
- On the other side of the ledger, a group of blue-state moderate Republicans have vowed to oppose any reconciliation package that doesn’t include Trump’s pledge to lift the cap on State and Local Tax deductions (SALT).
- Rep. Mike Lawler (R-NY) told reporters yesterday he's "been very clear from the start that I will not support a tax bill that does not lift the [SALT] cap". Of course, the inclusion of a SALT hike is likely to add hundreds of billions of dollars to the deficit and risk a more severe conservative rebellion.
- President-elect Donald Trump is scheduled to meet with Senate Republicans today at 18:00 ET 23:00 GMT and then with House Republicans on Saturday to determine final strategy for legislation.
- Punchbowl News notes that oscillation over strategy has put the GOP behind schedule for an incoming administration: "Eight years ago, the Senate had already passed a budget resolution — the first step in the process — before Trump even took office.”
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FOREX: AUDJPY Soars 1.85% Pre-RBA as China Signals More Stimulus
- Headlines from China on Monday hinted at looser monetary policy ahead, and the news has provided a boost to risk sentiment across currency markets, with the Australian dollar leading the G10 charge. We noted the monetary policy stance tweak and fiscal language used today reduces the odds of a meaningful move lower in the country's GDP growth target for '25.
- In contrast to the firm rally for antipodean FX, the Japanese Yen is the weakest major currency, prompting a near 2% advance for AUDJPY.
- Despite AUDUSD’s 1%advance, trend conditions remain bearish and resistance is at 0.6497, the 20-day EMA. This average has capped gains well in recent weeks.
- Notably, Friday had the first daily close below the 0.6400 mark since November 2023, and leaves key support at 0.6350.
- For USDJPY, today’s rally extends the most recent recovery to around 1.8% and spot is almost at identical levels to before the US election. Price action narrows the gap to initial firm resistance at 151.75, the 20-day EMA. However, the trend direction remains south, for now.
- Fresh pressure on EURGBP saw the cross touch a low of 0.8269 to again trouble the twice-tested support from last week. We have noted across the past few weeks a clear area of demand in the cross, layered between 0.8260-87 that coincides with the range-defining support around the 0.8300 handle.
- Analysts are expecting an unchanged RBA rate decision at 4.35%, before the focus turns swiftly to US CPI and the Bank of Canada Wednesday.
US: Hegseth And Gabbard Lobby Senators To Endorse Cabinet Nominations
US President-elect Donald Trump's Defense Secretary, Pete Hegseth, is on Capitol Hill again today to lobby Senators to endorse his nomination. He is set to meet Senator Joni Ernst (R-IA), seen as the key lawmaker for his nomination, and 20 other Republican senators this week, according to an adviser quoted by the Washington Post.
- Hegseth told reporters: "We're psyched to be back on Capitol Hill meeting with lots of senators this week. It's going be a great week."
- Hegseth is now bettors’ favourite again to become the next Pentagon chief, with no Republican Senators going on the record against the nomination, despite concerns over his personal conduct and lack of managerial experience.
- Trump told NBC yesterday, when asked if he has confidence in Hegseth : “Yes, I do. I really do. He’s a very smart guy. I’ve known him through Fox, but I’ve known him for a long time.”
- Trump's pick for Director of National Intelligence, Tulsi Gabbard, is also in Washington to face scrutiny from Senators. Gabbard's selection is of particular salience this week considering allegations that her political statements tracked closely with official positions espoused by Russia and Syria.
- Politico reports that Gabbard is, "prepared to add context to some of her more controversial moments. Expect Gabbard to argue that meeting with Assad isn’t the same as sympathizing with him."
Figure 1: US President-elect Donald Trump's Defense Secretary, %Implied Probability
Source: Polymarket
EURUSD TECHS: Resistance At The 20-Day EMA Remains Intact
- RES 4: 1.0937 High Nov 5 / 6 and a key resistance
- RES 3: 1.0825 High Nov 7
- RES 2: 1.0710 50-day EMA
- RES 1: 1.0630 High Dec 06
- PRICE: 1.0590 @ 16:10 GMT Dec 9
- SUP 1: 1.0461/0335 Low Dec 2 / Low Nov 22 and the bear trigger
- SUP 2: 1.0311 1.382 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 3: 1.0258 1.500 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 4: 1.0201 61.8% retracement of the Sep 28 - Juk 18 bull leg
EURUSD has pulled back from Friday’s 1.0630 high. This highlights the fact that resistance at 1.0581, the 20-day EMA, remains intact. A close above this average would highlight a clear breach of it and signal scope for a stronger corrective recovery, towards 1.0710, the 50-day EMA. An extension higher would also allow for an unwinding of the recent oversold condition. The medium-term trend direction is down. The bear trigger is 1.0335, Nov 22 low.
