RUSSIA: Local Markets Shut Over Christmas Holiday

Hawkish-leaning commentary from ECB Executive Board member Schnabel and a solid German October industrial production reading pulls the ESTR 1y1y rate to a 9-month high of 2.07%. Recent momentum leans in favour of further upside in EUR implied rates, and markets should be aware that an ECB hike to 2.25%, while unlikely in the near-term, is a conceivable scenario over a 2-year horizon.

• Schnabel noted that she was “rather comfortable” with market expectations that “the next rate move is going to be a hike, albeit not anytime soon”. Her comments aren’t that surprising – she’s a known hawk and already said on September 2 that "I think the point where central banks around the world start to hike interest rates again may come earlier than many people currently think." She also said she’d be ready to succeed Lagarde as ECB President if asked.
• The remarks are being interpreted as a further signal that another cut is unlikely, viewed alongside sticky (core) inflation data, improving PMIs and a stronger-than-expected Q3 compensation per employee reading.
• Hawkish price action in EUR STIRs over the past two weeks has not been driven by a repricing of inflation expectations. The EUR 5y5y inflation swap is currently at 2.08%, up from 2.05% on November 25 but below the Nov 18 closing high of 2.10% and the June peak of 2.15%. Shorter-dated inflation swaps remain below the 2% target.
• Euribor futures are up to 4.5 ticks lower versus Friday's settlement, led by the green pack. In the calendar spreads, early volume is centred in ERH6/M6 and ERM6/U6., with a steepening bias present.
• ECB-dated OIS now price just 3bps of easing through July 2026. This week’s Eurozone data calendar is fairly quiet, ahead of next week’s busier schedule with December flash PMIs and the ECB decision. 

TYF6 112.50/112.00ps vs 114.50c, sold the ps at 1 in 20k.

• RES 4: 0.6723 High Oct 21 ‘24   
• RES 3: 0.6707 High Sep 17 and a key resistance 
• RES 2: 0.6660 High Sep 18
• RES 1: 0.6649 High Dec 5
• PRICE: 0.6637 @ 08:02 GMT Dec 8 
• SUP 1: 0.6580/6543 High Nov 13 / 20-day EMA 
• SUP 2: 0.6517 Low Nov 27 
• SUP 3: 0.6466/21 Low Nov 26 / 21 
• SUP 4: 0.6415 Low Aug 21 / 22 and a bear trigger 

A strong impulsive bull wave in AUDUSD remains intact, having printed 10 consecutive sessions of higher highs. Recent gains have cleared a number of important resistance points, strengthening a bull theme and highlighting scope for a continuation higher. 0.6640, 76.4% of the Sep 17 - Nov 21 bear leg, has been pierced This opens 0.6707, the Sep 17 high and key resistance. Key support to watch is at 0.6543, 20-day EMA.