LOOK AHEAD: Eurozone Timeline of Key Events (Times GMT)

BNY Mellon write “the ECB is often criticised for setting policy according to the needs of a subset of core Eurozone economies, though in its defence this is the nature of a currency union which remains imperfect in many ways. However, applying the same approach to a subset of Eurozone economic sectors, especially one whose contribution to growth value-added is low (by President Lagarde’s own admission), could prove far more damaging.”

• “Either way, central banks need to get ahead of inflation and inflation expectations. Perhaps scarred by the experience of ‘transitory inflation’ post-pandemic, it is possible that policymakers are inclined to wait for full confirmation of inflation coming down before acting. Yet, this approach risks learning the wrong lessons as well: by the time disinflation becomes well-anchored, it could prove similarly difficult to dislodge.”
• “Market pricing for the ECB remains adequate, in our view. Even if doing so is an effort to tame the euro, ECB members may need to stop pushing back so aggressively against expectations. President Lagarde has an opportunity to set that tone on Thursday.”

• RES 4: 0.6900 High Jun 16 and a key resistance
• RES 3: 0.6871 High Dec 28 and the bull trigger
• RES 2: 0.6729/71 High Jan 12 / 3
• RES 1: 0.6633 50-day EMA
• PRICE: 0.6577 @ 06:58 GMT Jan 24
• SUP 1: 0.6526/25 Low Dec 7 and key support / Low Jan 17
• SUP 2: 0.6500 61.8% Fibonacci retracement for Oct - Dec upleg
• SUP 3: 0.6453 Low Nov 17
• SUP 4: 0.6412 76.4% Fibonacci retracement for Oct - Dec upleg

AUDUSD is unchanged and maintains a softer tone following recent bearish price action. The pair has breached a trendline drawn from the late October low. That break strengthens a bearish theme and signals scope for a deeper correction with sights on 0.6526, the Dec 7 low and the next key support. A clear break of this support would open 0.6500, a Fibonacci retracement. Initial resistance is at 0.6633, the 50-day EMA.

Germany looks to return to the market while Portugal and Italy both also still look to hold auctions in the week ahead. The EU and the Netherlands both came to the market yesterday. We now expect a Greek syndication next week instead of this week. In general, the syndication schedule is slowing down a bit as we approach the ECB meeting. We pencil in estimated gross issuance for the week at E20.5bln, down notably from the E51.2bln seen last week – but there are substantially lower redemptions and coupon payments.

• Germany will return to the market this morning with a 15-year Bund auction. On offer will be E1.5bln of the on-the-run 1.00% May-38 Bund (ISIN: DE0001102598) alongside E500mln of the 2.50% Aug-46 Bund (ISIN: DE0001102341).
• Also this morning, Portugal will look to sell a combined E1.5-1.75bln of 5/20-year OTs: the on-the-run 5-year 2.125% Oct-28 OT (ISIN: PTOTEVOE0018), the on-the-run 20-year 1.15% Apr-42 OT (ISIN: PTOTEPOE0032) and the off-the-run 20-year 4.10% Feb-45 OT (ISIN: PTOTEBOE0020).
• Tomorrow, Italy will come to the market for a BTP Short Term and 5/15-year BTPei auction. On offer will be E2.0-2.5bln of the 3.60% Sep-25 BTP Short Term (ISIN: IT0005557084), E0.5-1.0bln of the 1.50% May-29 BTPei (ISIN: IT0005543803) and E0.75-1.50bln of the 2.40% May-39 BTPei (ISIN: IT0005547812).

EZ240124.pdf