POWER: France's Political Crisis Could Spark a New Regional Energy Crisis: RTRS
Dec-06 12:57
France's political turmoil could trigger a new regional energy crisis, with a potential drop in electricity exports threatening to drive up power costs across Europe, according to Reuters.
- France exported nearly 84TWh of electricity in the first 11 months of 2024, an 85% increase over the same period in 2023.
- However, both nuclear and hydro production are nearing historical output limits, which could be affected by political gridlock or funding cuts.
- EdF, the state-owned utility that manages France’s nuclear fleet, has accumulated $10bn in debt and was nationalised in 2022.
- And EdF’s debt is a contributing factor to the government's collapse, as its financial struggles burden the national budget.
- And any reduction in France’s power generation, linked to political issues or budget cuts, could significantly reduce exports, leading to higher electricity costs in neighbouring nations.
- This may exacerbate the region's energy crisis. But France has thus far supplied most of the required electricity, helping to stabilise regional power prices.
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EUR: Parity Speculation Begins to Build, With Risk Picking Up into '25
Nov-06 12:55
The market's clearly taking the view that the Eurozone growth profile is among the most at risk in G10 from a Trump administration, with pre-election tariff threats compounding the impacts of faltering German manufacturing, the austere French budget proposals and exposure to the Russia-Ukraine war.
- Today's EUR/USD downmove is the largest since the onset of COVID, and the pickup in downside momentum has resulted in a break of a long-held trendline support drawn off the October '23 low (crossing at 1.0774 today).
- The new administration, twinned with the downshift in EUR rates today, has raised questions about the possibility of EUR/USD revisiting parity for the first time since H2'22 - levels that remain considerably below analyst consensus for year-end (which looks increasingly stale at 1.0950).
- With ~37bps of Fed cuts priced for year-end, and ~31bps of cuts at the ECB, a binary one-touch EUR/USD option prices just a 1.1% implied chance of spot hitting 1.00 between now and Dec-31. Where the risk becomes more apparent is further down the curve, and into the Trump administration's first few months - where markets price a 16% chance of touching parity by end-Jun'25, up from 9.6% this time last week.
FOREX: USDJPY Also Extends Session Highs, Targets Move to 155.27
Nov-06 12:55
- Persistent greenback strength continues to permeate global currency markets, and the yield sensitive Yen remains under substantial pressure, weakness that is only outpaced by the Euro on Wednesday.
- The USDJPY trend needle continues to point north and today’s rally reinforces current conditions. The pair has extended above 153.88, the Oct 28 high, to highlight a resumption of the uptrend.
- A continuation higher would open 155.27, a Fibonacci projection. This level matches closely to the July 30 high of 155.22, a level traded one day prior to the BOJ hike and ensuing sharp move lower for USDJPY across early August.
NOK: CADNOK Breaches Trendline Support, Norges Bank Decision Eyed Tomorrow
Nov-06 12:52
CADNOK pierced trendline resistance drawn from the June 2023 high overnight, reaching a high of 8.0155 (vs a trendline level of 0.9731). While off highs at typing, consolidation above this trendline would signal scope for an extension higher towards 8.0842 (March 29 high).
- CADNOK has rallied almost 4% from the Sep 20 low, highlighting bearish NOK sentiment when stripping out the impact of crude oil prices. The rally comes despite increasing CAD short interest (according to CFTC data) through this period.
- Looking across the G10 more broadly, NOK trades poorly against most currencies other than the SEK, JPY, CHF and EUR. EURNOK is 0.65% lower today, with the single currency under pressure amid this morning dovish repricing in ECB cut expectations. The 20-day EMA at 11.8716 has contained downside for now.
- Norges Bank is unanimously expected to keep the policy rate on hold at 4.50% tomorrow, with policy guidance once again likely to remain cautious. Although this may limit the scope for major market moves, there will still be interest in the prospect of US Presidential Election result commentary in the policy statement or press conference.
- MNI’s Norges Bank preview is here.
Figure 1: CADNOK Cross
