MNI US OPEN - ECB Set to Deliver Third Consecutive Cut
EXECUTIVE SUMMARY
- MNI ECB PREVIEW - BACK-TO-BACK CUTS CONTINUE
- SNB OPTS FOR BOLD 50BP RATE CUT
- TRUMP INVITES CHINA’S XI JINPING TO INAUGURATION, CBS SAYS
- AUSSIE LABOUR MARKET TIGHTENS, UNEMPLOYMENT AT 3.9%
Figure 1: Eurozone Inflation, % Y/Y (LHS) & ECB Deposit Rate, % (RHS)
Source: MNI, ECB, Eurostat, Bloomberg
NEWS
MNI ECB PREVIEW - DECEMBER 2024: Back-to-Back Cuts Continue
The ECB will cut by 25bp, marking the third back-to-back cut, and the fourth reduction this year. Given that the ECB has previously shown some flexibility in following its self-prescribed data dependent and meeting-by-meeting approach, future meetings carry some degree of uncertainty over policy outcomes. This time around, the prospect of a 50bp cut, although appearing unlikely, cannot be entirely discounted.
SNB (MNI): SNB Cuts 50bps With Room to Manoeuvre
The SNB cut its key policy rate by 50 basis points to 0.5%, with the rate on excess sight deposits cut to 0%, the Board announced on Thursday, adding that it remains willing to be active in the foreign exchange market as necessary. President Martin Schlegel, noted that markets were pricing in a terminal rate of 0% some time in 2025, but avoided making any comment as to the SNB's rate path or whether it was clear rates would fall further. Monetary conditions were "appropriate,” he said, speaking in his first press conference at the head of the Bank, adding that there was room for further policy manoeuvring, but without directly addressing the possibility of a future move back to negative interest rates.
US/CHINA (BBG): Trump Invites China’s Xi Jinping to Inauguration, CBS Says
US President-elect Donald Trump has invited Chinese President Xi Jinping to attend his inauguration next month, CBS reported, citing multiple sources. The invitation may signal an effort by Trump to court his Chinese counterpart just as he threatens fresh tariffs against the world’s second-largest economy. Xi’s attendance, however, would be unprecedented: No Chinese leader has ever joined an inauguration ceremony of the US president, which is typically attended by ambassadors. No foreign head of state has attended one in more than a century, according to State Department records going back to 1874.
MIDEAST (WSJ): Hamas Concedes on Israeli Troops in Gaza, Raising Hopes for Hostage Deal
Hamas has yielded to two of Israel’s key demands for a cease-fire deal in Gaza, Arab mediators said, raising hopes of an agreement that could release some hostages within days despite the repeated collapse of previous negotiations. The militant group told mediators for the first time that it would agree to a deal that would allow Israeli forces to remain in Gaza temporarily when the fighting stops. Hamas also handed over a list of hostages, including U.S. citizens, whom it would release under a cease-fire pact, something it hasn’t done since the first truce in the conflict last year.
NATO (FT): Nato’s European Members Discuss 3% Target for Defence Spending
European Nato members are holding talks about increasing the alliance’s target for defence spending to 3 per cent of GDP at its annual summit next June partly in anticipation of Donald Trump’s return as US president. Four people involved in the preliminary talks told the Financial Times they were discussing the steep rise from 2 per cent of GDP, a move that would put intense pressure on already strained national budgets and that has raised misgivings in many capitals.
CANADA (MNI): Ontario to Cut U.S. Energy Flows When Tariffs Hit
Ontario Premier Doug Ford said Wednesday he plans to shut off energy exports to the U.S. if Donald Trump implements tariffs against Canada next month, the most strident threat of retaliation to date against the president-elect's proposed 25% levy. “We will use every tool in our toolbox including cutting them off energy that we’re sending down there,” said Ford, the leader of Canada's most populous and richest province. Ontario's economy is also reliant on seamless trade with auto factories in neighboring Michigan.
GERMANY (MNI): IFO Forecasts GDP Growth Between 0.4-1.1% in 2025
The IFO institute forecasts German GDP growth of 0.4% in 2025 in its base case, but at least sees the possibility for an "alternative scenario" in which the economy grows 1.1%. That's on the back of uncertainty of Germany "overcom[ing] its structural challenges". Note that this compares to IFO's last projection of 0.9% 2025 growth published in September. The highlighting of an alternative scenario might be a nod to potential election outcomes.
UK/EU (Telegraph): Starmer ‘To Hold Talks With EU on Defence Co-operation’
Sir Keir Starmer will hold talks on defence co-operation with the European Union, it has been reported. The Prime Minister will on Thursday accept a symbolic invitation to discuss security and closer ties with the bloc’s 27 leaders, according to the Financial Times. It would be the first time a British prime minister has held such a meeting since Brexit. The move comes as Labour faces criticism for attempting to go back on the Brexit deal and return to a closer relationship with the EU.
CHINA (BBG): PBOC-Run Paper Sees Stable Yuan, Warns Against One-Way Bets
China’s yuan has a “solid foundation to remain basically stable” but the currency is also likely to be volatile in both directions going forward, according to a commentary published Wednesday by the central bank-backed Financial News. The Chinese economy has shown signs of stabilizing and an improvement in fundamentals since officials rolled out a broad stimulus package in September - providing the conditions for the local currency to remain stable at a reasonable and balanced level, the People’s Bank of China-run paper said. The yuan is likely to strengthen at year-end on an increased number of corporate foreign-exchange settlements, it added.
CHINA (MNI): Beijing to Protect Firms from U.S. Bill - MOFCOM
MNI (Beijing) Beijing will take all necessary measures to protect Chinese firms interests regarding the U.S. House of Representatives’ upcoming vote on the annual defense bill, which this year includes more than USD3 billion to remove Chinese telecommunications equipment, He Yadong, spokesperson for the Ministry of Commerce said on Thursday.
S. KOREA (MNI): Opposition Put Forward Motion for 2nd Impeachment Vote on 14 Dec
Six opposition parties have officially submitted a second impeachment motion against President Yoon Suk-yeol to the National Assembly's Legislative Affairs Department. The motion will be reported to the National Assembly's plenary session on 13 December, setting up for a second impeachment vote at ~1700 local time (0300ET, 0800GMT) on 14 December. The previous impeachment vote on 7 December failed due to the lack of a quorum in the National Assembly after a large majority of lawmakers from the conservative People Power Party (PPP) left the chamber.
OIL (BBG): OPEC+ Supply Delay Won’t Prevent Oil Glut Next Year, IEA Says
Global oil markets face a glut next year despite last week’s decision by OPEC+ to delay supply increases, the International Energy Agency said. World markets will be oversupplied by a hefty 1.4 million barrels a day if the group proceeds with plans to revive output starting in April, the IEA predicted in a monthly report. Even if OPEC+ cancels next year’s hikes entirely, there’ll still be an overhang of 950,000 barrels a day. The cartel led by Saudi Arabia and Russia on Dec. 5 agreed yet again to postpone plans to restore shuttered output amid faltering crude prices, and slow the pace of increases once they do begin in the second quarter.
DATA
SWEDEN DATA (MNI): Smaller "Black Week" Sales and Electricity Surge Biased CPIF Higher
- SWEDEN FINAL NOV CPIF +1.8% Y/Y
Swedish November CPIF ex-energy confirmed flash estimates at 2.4% Y/Y, four tenths above the Riksbank's September MPR projection. There were clearly seasonal/one-off factors at play in November, which should allow the Riksbank to look through the release at the December meeting (where a 25bps cut is expected). However, the recent uptick in inflation (and inflation momentum) may contribute to a slightly more cautious Riksbank stance heading into 2025.
SWEDEN DATA (MNI): Labour Market Still Weakening According to PES Data
The Swedish labour market continued to gradually loosen in November, according to Public Employment Service data. This underscores the Riksbank's guidance for further rate cuts in December and H1 2025, even as inflation has tracked above the September MPR projection in recent months. The unemployment claims rate ticked up to 7.0% in November (vs 6.9% prior). This was the 16th consecutive month that the 3mma of the claims rate has moved higher.
AUSTRALIA DATA (MNI): Aussie Labour Market Tightens, Unemployment at 3.9%
- AUSTRALIA NOV UNEMPLOYMENT RATE +3.9%
- AUSTRALIA NOV LABOR PARTICIPATION RATE +67%
- AUSTRALIA NOV EMPLOYED PERSONS CHANGE 35.6K
- AUSTRALIA NOV F-T EMPLOYED PERSONS CHANGE 52.6K
The unemployment rate tightened 20 basis points to 3.9% in November, 30bp better than expected, while 35,613 jobs were created, more than the 25,000 anticipated, data from the Australian Bureau of Statistics showed. “In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October,” said David Taylor, head of labour statistics at the ABS. “This contributed to the rise in employment and fall in unemployment.” The Reserve Bank of Australia expects unemployment at 4.3% by Q4.
FOREX: CHF Lags Following Bold SNB Cut, AUD Leads G10 Gains
- The Swiss Franc has weakened following the SNB opting for a larger 50bp rate cut compared to consensus forecasts expecting a more moderate 25bp move. EURCHF rose around 65 pips to trade back above 0.93 and print a 0.9344 high on the session. Despite the initial spike, momentum then stalled and a late mention that the likelihood of negative rates has become smaller prompted a small reversal back to 0.9315.
- USDCHF rose to a fresh two-week high of 0.8893, and the renewed strength sees us narrow the gap to the post-election highs of 0.8957. The 50-day EMA has supported the pair well here, with the dip following US NFP providing a good entry point to the broader trend.
- Elsewhere, AUDUSD has risen 0.7% and trades back above 0.6400 on the solid jobs report overnight, where the unemployment rate fell back sub 4.0%, well below forecasts. This has underpinned the Aussie recovery, following AUDUSD printing a new one-year low below 0.6340 on Wednesday.
- Mixed signals this week from the China signals, the RBA meeting and local data leaves AUDUSD just a touch firmer on the week, whereas AUDJPY remains ~2% in the green.
- Higher core yields continue to weigh on the Japanese yen and contrast to the more dovish rhetoric surrounding the immediate steps for BOJ monetary policy. USDJPY made a brief test towards the post-US CPI highs around 152.80, however, subsequent CHFJPY supply has helped contain the price action.
- Focus now turns to the ECB and EURUSD continues to oscillate around 1.0500, where notable levels of option expiries are found. A resistance at 1.0566, the 20-day EMA, remains intact - for now and initial support is at 1.0461, the Dec 2 low.
EGBS: Futures Trading Heavy Ahead of ECB Decision
Major EGB futures have traded heavily this morning, with crude oil futures consolidating yesterday’s rally and Italian supply weighing. Bund futures are -40 ticks today at 135.55.
- Bund futures trade just above the 20-day EMA at 135.51, with next support at 135.04 (2.208% 10-year yield level).
- The current bearish corrective cycle in Bund futures remains in play and the move down is allowing a recent overbought condition to unwind.
- The surprise 50bp SNB cut provided brief support to EGBs, but the less dovish outlook in the policy statement and press conference eventually dominated.
- German yields are up to 4bps higher today, with the curve steepening a little.
- Italy concluded its 2024 issuance with E8.5bln of 3/7/11/30-year BTPs this morning.
- The 10-year BTP/Bund spread is 2.5bps wider today at 109bps.
- Focus turns to the ECB decision at 1315GMT/1415CET. Analysts and markets are heavily tilted towards a 25bp cut, with focus on the guidance and updated macroeconomic projections.
GILTS: Weaker Alongside Peers & Bid in Oil, Wider Macro Events Eyed
Gilts hold lower, with adjustments to weakness in core global FI peers and the latest uptick in crude oil futures applying pressure.
- Light support seen around the time of the SNB’s 50bp rate cut (although guidance not particularly dovish) and ticks away from highs in oil futures was quickly sold into.
- Futures print lowest levels of the month at 94.82 before modest recovery to 94.90.
- Initial support at the Nov 25 low (94.66). Bears ultimately target key support at the Nov 18 low (93.40).
- Yields 1-4.bp higher across the curve, steepening.
- 10s last 4.355%, 16.5bp off their Dec low. The Nov 25 high at 4.388% presents the next upside area of interest there.
- Gilt/Bund spread broke back above 220bp, although similar to yesterday’s widening episode, faded back to ~219bp.
- SONIA futures flat to -4.0.
- BoE-dated OIS showing 80bp of cuts through Dec ’25, a level that has proved to be a bit of an anchor in recent sessions.
- Little of note on the UK calendar today, which will leave focus on spillover from the ECB decision and U.S. data.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Dec-24 | 4.699 | -0.1 |
Feb-25 | 4.501 | -19.9 |
Mar-25 | 4.415 | -28.5 |
May-25 | 4.243 | -45.7 |
Jun-25 | 4.166 | -53.4 |
Aug-25 | 4.043 | -65.7 |
Sep-25 | 4.008 | -69.2 |
Nov-25 | 3.933 | -76.7 |
Dec-25 | 3.900 | -80.0 |
EQUITIES: Eurostoxx 50 Futures Trading Close to This Week's Highs
A bull cycle in the Eurostoxx 50 futures contract remains intact and price is trading closer to its recent highs. The contract has recently breached the 50-day EMA. The clear break of this average strengthens a bullish theme and note that 4961.00, the Nov 6 high, has also been cleared. Sights are on 5015.00 next, the Oct 29 high. Key support is 4699.00, the Nov 19 low. Initial support to watch lies at 4887.95, the 20-day EMA. The S&P E-Minis contract maintains a bullish tone and the latest pullback is considered corrective. Recent gains confirm a resumption of the uptrend and signal scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. A resumption of the uptrend would open 6145.26, a Fibonacci projection. Initial support to watch lies at 6024.9, the 20-day EMA.
- Japan's NIKKEI closed higher by 476.91 pts or +1.21% at 39849.14 and the TOPIX ended 23.72 pts higher or +0.86% at 2773.03.
- Elsewhere, in China the SHANGHAI closed higher by 29.01 pts or +0.85% at 3461.5 and the HANG SENG ended 242 pts higher or +1.2% at 20397.05.
- Across Europe, Germany's DAX trades higher by 19.38 pts or +0.1% at 20418.88, FTSE 100 higher by 18.54 pts or +0.22% at 8320.34, CAC 40 up 0.03 pts or +0% at 7422.62 and Euro Stoxx 50 up 2.54 pts or +0.05% at 4961.42.
- Dow Jones mini down 100 pts or -0.23% at 44121, S&P 500 mini down 10.75 pts or -0.18% at 6082, NASDAQ mini down 55.75 pts or -0.26% at 21739.
Time: 09:50 GMT
COMMODITIES: Recent Gains in WTI Futures Considered Corrective for Now
A bearish threat in WTI futures remains present and this week’s gains are - for now - considered corrective. A resumption of the bear cycle would open $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $77.04, the Oct 8 high. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high. Gold has traded higher this week. A key short-term resistance at $2721.4, the Nov 25 high, has been pierced and this represents a positive development. A continuation higher would expose key resistance at $2790.1, the Oct 31 high. Clearance of this level would confirm a resumption of the primary uptrend. On the downside key support to monitor is $2536.9, the Nov 14 low. First support is $2645.0, the 50-day EMA, ahead of $2605.3, the Nov 26 low.
- WTI Crude up $0.22 or +0.31% at $70.51
- Natural Gas down $0.03 or -0.95% at $3.347
- Gold spot down $2.62 or -0.1% at $2716.49
- Copper up $3.65 or +0.86% at $430.1
- Silver up $0.27 or +0.84% at $32.174
- Platinum up $7.81 or +0.83% at $948.46
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 12/12/2024 | - | *** |  CN | Money Supply |
| 12/12/2024 | - | *** | CN | New Loans |
| 12/12/2024 | - | *** | CN | Social Financing |
| 12/12/2024 | 1315/1415 | *** |  EU | ECB Deposit Rate |
| 12/12/2024 | 1315/1415 | *** | EU | ECB Main Refi Rate |
| 12/12/2024 | 1315/1415 | *** | EU | ECB Marginal Lending Rate |
| 12/12/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 12/12/2024 | 1330/0830 | *** | US | PPI |
| 12/12/2024 | 1330/0830 | * |  CA | Building Permits |
| 12/12/2024 | 1330/0830 | * | CA | Household debt-to-income |
| 12/12/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 12/12/2024 | 1345/1445 | EU | ECB Monetary Policy Press Conference | |
| 12/12/2024 | 1500/1000 | * | US | Services Revenues |
| 12/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 12/12/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 12/12/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 12/12/2024 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 13/12/2024 | 2350/0850 | *** |  JP | Tankan |
| 13/12/2024 | 0001/0001 | ** |  GB | Gfk Monthly Consumer Confidence |
| 13/12/2024 | 0430/1330 | ** | JP | Industrial Production |
| 13/12/2024 | 0700/0800 | ** |  SE | Unemployment |
| 13/12/2024 | 0700/0700 | ** | GB | UK Monthly GDP |
| 13/12/2024 | 0700/0700 | ** | GB | Index of Services |
| 13/12/2024 | 0700/0700 | *** | GB | Index of Production |
| 13/12/2024 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 13/12/2024 | 0700/0700 | ** | GB | Trade Balance |
| 13/12/2024 | 0700/0800 | ** |  DE | Trade Balance |
| 13/12/2024 | 0745/0845 | *** |  FR | HICP (f) |
| 13/12/2024 | 0800/0900 | *** |  ES | HICP (f) |
| 13/12/2024 | 0930/0930 | ** | GB | Bank of England/Ipsos Inflation Attitudes Survey |
| 13/12/2024 | 1000/1100 | ** | EU | Industrial Production |
| 13/12/2024 | 1330/0830 | ** | US | Import/Export Price Index |
| 13/12/2024 | 1330/0830 | ** | CA | Monthly Survey of Manufacturing |
| 13/12/2024 | 1330/0830 | ** | CA | Wholesale Trade |
