POWER: Italy January Power to Open Lower
The Italian January power base-load contract is set to open lower with losses in EU gas prices and an upward revision in Italy’s temperature forecast.
- Italy Base Power JAN 26 closed down 0.3% at 113.74 EUR/MWh on 1 Dec
- Italy Power Cal 26 closed down 1% at 100.66 EUR/MWh on 1 Dec
- TTF Gas JAN 26 down 1.6% at 27.775 EUR/MWh
- EUA DEC 25 down 0.7% at 82.04 EUR/MT
- TTF front month is trading just above the low of €27.75/MWh yesterday under pressure from warming weather later this week.
- Italy front-month power/TTF 30-day correlation stood at 0.83 as of Monday’s close.
- The latest two-week ECMWF weather forecast for Rome suggests mean temperatures have been revised up to rise well above normal from early/mid next week.
- Mean temperatures in Rome are forecast at 10.2C on Wednesday, from 9.9C on Tuesday and below the seasonal average of 11.1C.
- The PUN index settled at €133.69/MWh for Tuesday’s delivery, up from €132.02/MWh for Monday’s delivery.
- Wind output in Italy is forecast between 503MW and 3.47GW during base load on 2-10 December. Wind output in Italy is set to decline from next week.
- Italian wind output is forecast at 853MW during base load on Wednesday, from 784MW on Tuesday, according to SpotRenewables.
- Residual load in Italy is forecast at 34.58GWh/h on Wednesday, from 34.4GWh/h on Tuesday, Reuters data showed.
- Power demand in Italy is forecast at 37.32GWh/h on Wednesday, from 37.73GWh/h on Tuesday, Reuters data showed.
- Italian residential/commercial gas demand is forecast at 147.8mcm/d on Wednesday, from 149.1mcm/d on Tuesday, Bloomberg data showed.
- Italy’s hydro balance forecast has been revised up to end at -1.14TWh on 16 December, from -1.33TWh previously, Bloomberg data showed.
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
