MNI US OPEN - China, Canada Commit to Deepen Trade Cooperation

EXECUTIVE SUMMARY

• TRUMP WAS TOLD ATTACK ON IRAN WOULDN’T GUARANTEE COLLAPSE OF REGIME: WSJ
• TRUMP TO PUSH PLAN FOR TECH COMPANIES TO FUND NEW POWER PLANTS: WSJ
• DENMARK, GREENLAND SEEK CONGRESSIONAL SUPPORT AGAINST TRUMP BID
• CHINA AND CANADA COMMIT TO DEEPEN TRADE COOPERATION

Figure 1: Kevin Warsh remains favourite to be nominated as next Fed Chair

Source: Polymarket

NEWS

US/IRAN (WSJ): Trump Was Told Attack on Iran Wouldn’t Guarantee Collapse of Regime

President Trump was advised that a large-scale strike against Iran was unlikely to make the government fall and could spark a wider conflict, U.S. officials said, and for now will monitor how Tehran handles protesters before deciding on the scope of a potential attack. The U.S. would need more military firepower in the Middle East both to launch a large-scale strike and protect American forces in the region and allies such as Israel should Iran retaliate, the advisers told Trump, the officials said.

US (WSJ): Trump to Push Plan for Tech Companies to Fund New Power Plants

The Trump administration is planning to propose that the nation’s largest power grid operator hold an emergency auction in which tech companies would bid to have new power plants built, according to people familiar with the matter. The directive, expected Friday, would be an unprecedented attempt by the federal government to check rising electricity prices within PJM Interconnection, a 13-state power market spanning from New Jersey to Kentucky. The build-out of data centers there in response to the artificial-intelligence boom is straining the grid’s capacity and has resulted in substantially higher costs in several of the grid operator’s recent power auctions. 

US/CHINA (MNI): U.S. Firms in China More Optimistic for 2026

MNI (Beijing) U.S. firms operating in China have increased their confidence about medium-term business prospects, according to the American Chamber of Commerce in China on Friday, with a recent survey showing that 48% of respondents reported an optimistic or slightly optimistic outlook for the next two years, up from 37% in 2025. Sentiment toward U.S.-China bilateral relations has also improved. The share of companies holding a “pessimistic” or “slightly pessimistic” view declined to 52%, from 65% the previous year.

CANADA/CHINA (MNI): China and Canada Commit to Deepen Trade Cooperation

MNI (Beijing) China and Canada will enhance economy, trade and energy cooperation, whilst reactivating the Sino-Canadian Joint Agricultural Committee to strengthen agricultural cooperation and food security, according to a statement on CCTV on Friday following Canadian Prime Minister Mark Carney’s visit to China. Both sides are committed to expanding bilateral trade, increasing two-way investment, and providing a fair and open business environment for enterprises from the two countries, the statement said.

ECB (MNI): No Near-Term Interest Rate Debate - ECB's Lane

The European Central Bank's baseline scenario sees inflation "more or less at target "for several years with growth close to potential meaning "there is no near-term interest rate debate,” Chief Economist Philip Lane said in an interview published on Friday. "The current level of the interest rate delivers the baseline for the next several years," Lane told Italian daily La Stampa. "Under these circumstances, no one expects very large movements in interest rates. The pros and cons of the current 2% rate versus slightly lower or slightly higher is a more ‘normal’ monetary policy debate.

EU (FT): EU ‘Membership-Lite’ Plan for Ukraine Spooks European Capitals

FRANCE (MNI): Gov’t Suspends Budget Debates, Use Article 49.3 or Ordinances Looming

As highlighted through this week, it looks likely that PM Lecornu will have to resort to Article 49.3 (or, perhaps more controversially, ordinances), to push his 2026 budget through parliament. This risks his government falling to a censure vote. The Socialist party's actions remain key - a party-wide abstention from any confidence vote should keep Lecornu's government in place, but no such guarantees have been made. A reminder that tacit Socialist support last year came because Lecornu had promised not to use Article 49.3 to pass his budget.

RIKSBANK (MNI): Swedish Mortgages a Vulnerability - Riksbank Head

Swedish households reliance on variable rate mortgages and the prolonged spell of krona weakness meant they were hit harder than in other countries during the period of high inflation and high interest rates, but the country's outlook is now relatively favorable, Riksbank Governor Erik Thedeen said. "The cuts in the policy rate since May 2024 have improved the financial situation of many households, especially those with large loans" with the share of interest payments in household disposable income falling from a peak of around 7% to around 5% and "Our forecast is that the policy rate will remain roughly at the current level going forward," Thedeen said.

DATA

GERMANY DATA (MNI): HICP Confirms Flash, Broad-Based Goods Pullback

• GERMANY DEC FINAL HICP 2.0% Y/Y (2.0% FLASH, 2.6% NOV)
• GERMANY DEC FINAL CPI 1.8% Y/Y (1.8% FLASH, 2.3% NOV)

German HICP confirmed flash estimates at 2.0% Y/Y in December, down from 2.6% in November. As noted after the flash release, some caution is warranted when interpreting the Y/Y figure, which looks to be heavily influenced by a base effect after a seasonally strong 0.7% M/M rise in December 2024. Goods inflation was soft in December. Clothing and footwear eased to -0.7% Y/Y (vs 0.5% prior), while furnishings and household equipment was -0.5% Y/Y (vs 0.2% prior). Vehicle inflation and several recreation and culture categories also decelerated.

ITALY DEC FINAL HICP 1.2% Y/Y (1.2% FLASH, 1.1% NOV) (MNI)
ITALY DEC FINAL HICP 0.2% M/M (0.2% FLASH, -0.2% NOV) (MNI)

RATINGS: Stable Outlooks Set for Review After Close

Potential rating reviews of note scheduled for after hours on Friday include:

• Fitch on the Netherlands (current rating: AAA; Outlook Stable)
• Moody’s on Latvia (current rating: A3; Outlook Stable)
• Morningstar DBRS on the EFSF (current rating: AAA; Outlook Stable), the ESM (current rating: AAA; Outlook Stable), Portugal (current rating: A (high), Stable Trend) & Switzerland (current rating: AAA, Stable Trend)
• Scope Ratings on the EFSF (current rating: AA+; Outlook Stable) & the ESM (current rating: AAA; Outlook Stable)

Click here to access the indicative 2026 sovereign rating review schedules across the five most prominent rating agencies (Fitch, Moody's, S&P, Morningstar DBRS & Scope Ratings). Note that the schedules are indicative only and ratings can be reviewed on an ad-hoc basis. Rating agencies may also adjust their schedules during the year.

FOREX: USDJPY Moderates Again as Verbal Jawboning Continues

• Finance Minister Katayama was back on the wires overnight, adding to prior comments in the week relating to the weakening yen and the ability of the MOF to deal with rapid speculatory moves. Katayama expressed that the current agreement with the US means they are able to intervene to address rapid moves in the JPY. Bullish momentum for USDJPY has certainly had the wind taken out of its sails over the past three sessions, and overnight weakness for the pair extended on a break of the prior session lows at 158.23 and 158.10 to print a session low of 157.98.
• Additionally, Japan's main opposition CDP of Japan and Komeito agreeing to form a new political party has also acted as a moderate yen
  tailwind, offering some potential resistance to the market concerns surrounding the Takaichi-led fiscal outlook.
• The fact that domestic economic factors have been so influential on the latest Yen slide is likely to keep dips for cross/JPY very well supported, with initial USDJPY support moving up to 157.20, the 20-day EMA. Immediate targets for a resumption of USDJPY strength include 159.60 and 160.00, both Fibonacci projection points.
• Outside of the JPY, the USD is mixed against most others after hitting a new year-to-date high on Thursday. The data-tripped dollar rally sees the USD Index within 1% of the strongest levels since May of last year and reflects the hawkish repricing of the front-end of the USD curve and reminds us of the sensitivity of markets to any evidence showing a more stable labour market.
• The dollar will likely follow these cues with a bias to rally amid geopolitical uncertainty (specifically toward Iran and Greenland), further exposing the likes of EURUSD, GBPUSD and AUDUSD.
• Industrial and manufacturing production data from the US is the data highlight Friday, but neither release is likely to sway market conviction from the view that the Fed are unlikely to change policy rates at their Jan28 meeting. This should keep focus instead on the Fed speaker schedule: Fed's Collins, Bowman and Jefferson are all due, and the latter two appearances are set to address the economy and monetary policy directly. Bowman is now only a very outside chance to be nominated as Fed Chair by Trump (Polymarket prices 2% odds), but her view remains influential on the FOMC. 

EGBS: 10s30s Comfortably Below Cycle Highs, But Steepening Drivers Still in Play

• German 10s30s is up 1bp at ~59bps, but remains below this year’s 64bp closing high. January flattening seemingly represents an unwind of concentrated positioning built up in 2025. Looking ahead, themes such as the Dutch pension fund transition and higher Government borrowing remain in play, suggesting the longer-term bias is still towards steeper curves.
• 10-year OATs lightly underperform German peers this morning, after the Government cancelled budget debates scheduled for Friday and Monday. As highlighted through this week, it looks likely that PM Lecornu will have to resort to Article 49.3 (or, perhaps more controversially, ordinances), to push his 2026 budget through parliament.
• Bund futures are -12 ticks at 128.30, with cumulative volumes below this week’s average for the time of day.
• In his interview with La Stampa released this morning, ECB Chief Economist Lane noted that a sustainable move above the ECB’s medium-term inflation target would require a “significant acceleration in the economy” relative to its baseline of near-potential growth.
• German HICP confirmed flash estimates at 2.0% Y/Y in December, down from 2.6% in November. As noted after the flash release, some caution is warranted when interpreting the Y/Y figure, which looks to be heavily influenced by a base effect after a seasonally strong 0.7% M/M rise in December 2024.
• The remainder of today’s global macro calendar is relative light. 

Figure 2: German 10s30s Curve Since 2025

Source: Bloomberg Finance L.P

GILTS: Yields Off Recent Lows, Bulls Remain in Control

Gilts are a little softer on the day, operating in narrow ranges after cues from wider core global FI markets provided pressure at the open.

• Futures -9 at 92.39, initial support at the Jan 9 low (91.99).
• Zooming out, bulls remain in technical control despite the pullback, initial resistance at Wednesday’s high (92.95).
• Yields are less than 1bp higher across the curve, 10s briefly traded back above 4.40%.
• 10-Year gilt yields have held above the base of the triangle formation that we have previously identified in closing terms. The support line was breached intraday on Wednesday but held yesterday.
• The support comes in at 4.343% today, with the year-to-date low located just below at 4.336%.
• Early ’26 outperformance vs. swaps maintained despite the pullback from highs in recent sessions. Cash holdings/frontrunning of near-term cash flows touted as explainers by some sell-side deals, while the DMO’s reduction in issuance WAM continues to support long end spreads.
• The release of the text from BoE Governor Bailey’s Tuesday appearance failed to provide any real relevance re: the short-term direction of monetary policy.
• BoE-dated OIS now pricing ~41.5bp of cuts through year-end vs. ~48bp at one point this week. Firmer-than-expected monthly UK GDP data and spillover from U.S. data has promoted the hawkish pullback in the second half of the week, after the market failed to fully discount 2x 25bp of easing through year-end.
• The next cut is still fully priced come the end of the June MPC, with ~80% odds of a move priced through April.
• Ongoing deterioration in the labour market presents the most meaningful dovish risk at this stage.
• Labour market and CPI data is due next week.

EQUITIES: Eurostoxx Futures Remain Close to This Week's Cycle Highs

A bull cycle in Eurostoxx 50 futures is intact and the contract is holding on to its recent gains. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend. The 6000.00 handle has been breached, sights are on 6086.99 next, a Fibonacci projection. Initial firm support to watch is 5889.39, the 20-day EMA. A pullback would be considered corrective and allow an overbought condition to unwind. The trend structure in S&P E-Minis is unchanged, it remains bullish and the latest pullback appears to have been a correction. Recent gains confirm a resumption of the primary uptrend and maintain the bullish price sequence of higher highs and higher lows. Sights are on 7036.74, a Fibonacci projection point. On the downside, initial support to watch lies at the 20-day EMA (pierced) - currently at 6952.17. The 50-day EMA lies at 6898.30.

• Japan's NIKKEI closed lower by 174.33 pts or -0.32% at 53936.17 and the TOPIX ended 10.3 pts lower or -0.28% at 3658.68.
• Elsewhere, in China the SHANGHAI closed lower by 10.687 pts or -0.26% at 4101.913 and the HANG SENG ended 78.66 pts lower or -0.29% at 26844.96.
• Across Europe, Germany's DAX trades lower by 60.16 pts or -0.24% at 25288.03, FTSE 100 lower by 0.54 pts or -0.01% at 10238.03, CAC 40 down 38.8 pts or -0.47% at 8274.32 and Euro Stoxx 50 down 21.76 pts or -0.36% at 6019.38.
• Dow Jones mini up 50 pts or +0.1% at 49689, S&P 500 mini up 17.75 pts or +0.25% at 6999.75, NASDAQ mini up 116.5 pts or +0.45% at 25823.25.

Time: 10:00 GMT

COMMODITIES: WTI Bull Cycle Intact Despite Latest Pullback

A bull cycle in WTI futures remains intact for now and the rally earlier this week reinforces a bull theme. The move lower from Wednesday’s high appears corrective - for now. Price has traded through a key S/T resistance at $61.25, the Oct 25 high. This strengthens the bull phase and highlights a stronger reversal of the recent downtrend. Sights are on $62.59 next, a Fibonacci retracement. Initial firm support lies at $58.64, the 50-day EMA. The trend structure in Gold is unchanged, it remains bullish and this week’s fresh cycle highs reinforce current conditions. The move higher confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Sights are on the $4696.3 next, a Fibonacci projection. Initial firm support to watch lies at $4459.2, the 20-day EMA. A break of the average would signal the start of a corrective phase.

• WTI Crude up $0.63 or +1.06% at $59.8
• Natural Gas up $0.05 or +1.66% at $3.179
• Gold spot down $12.38 or -0.27% at $4603.62
• Copper down $10.1 or -1.69% at $589.05
• Silver down $1.08 or -1.17% at $91.3031
• Platinum down $69.18 or -2.87% at $2342.17

Time: 10:00 GMT

Date	GMT/Local	Impact	Country	Event
16/01/2026	1315/0815	**	CA	CMHC Housing Starts
16/01/2026	1330/0830	*	CA	International Canadian Transaction in Securities
16/01/2026	1415/0915	***	US	Industrial Production
16/01/2026	1500/1000	**	US	NAHB Home Builder Index
16/01/2026	1550/1050		US	Boston Fed's Susan Collins
16/01/2026	1600/1100		US	Fed Vice Chair Michelle Bowman
16/01/2026	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
16/01/2026	2030/1530		US	Fed Vice Chair Philip Jefferson
19/01/2026	2350/0850	*	JP	Machinery Orders