EU FINANCIALS: Novo Banco - New Issue

• RES 4: 0.6733 High Oct 13  
• RES 3: 0.6688 High Nov 7 and a reversal trigger              
• RES 2: 0.6538 50-day EMA  
• RES 1: 0.6451 20-day EMA5
• PRICE: 0.6372 @ 07:53 GMT Dec 16
• SUP 1: 0.6337 Low Dec 11
• SUP 3: 0.6300 Round number support
• SUP 3: 0.6270 Low Oct 26 ‘23 
• SUP 4: 0.6259 1.000 proj of the Sep 30 - Nov 6 - 7 price swing 

The trend direction in AUDUSD remains down and last week’s extension reinforces the current bearish theme. The move lower maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Sights are on 0.6259 next, a Fibonacci projection. Initial firm resistance to watch is 0.6451, the 20-day EMA.

SONIA markets little changed, with the recovery in the long end of core global FI markets unconvincing at this stage.

• Futures hover at/around late Friday lows, last flat to -3.0.
• BoE-dated OIS also little changed, showing essentially 0 odds of a movement in rates later this week, followed by 20bp of cuts through February, 27.5bp of easing through March and 76bp of cuts through ’25.
• December '25 pricing hasn't been able to push through 3.5x 25bp cuts (88.75bp) in recent weeks, given the BoE's preference for gradual easing and the still sticky inflation backdrop.
• Labour market (Tuesday) and CPI (Wednesday) data will provide the major domestic inputs ahead of this week's BoE decision.
• Today’s flash PMI data could also impact the short end.
• We still look for BoE cuts in February & May.
• To us, the most realistic dovish outcome at this week’s meeting would probably be 3 dovish dissents voting for a cut (with rates remaining unchanged), although there may be as little as one dovish dissenter (Dhingra). More on that and the tier 1 data to come in our usual run of previews.
• Goldman Sachs recommend closing SFIZ4/Z5 flatteners for profit and moving to an outright long in SFIZ5
• They believe that the case for steady BoE cuts is becoming clearer, pointing to last week’s GDP & manufacturing data.

ECB-dated OIS price ~116bps of easing through the end of next year, corresponding to a deposit rate of just over 1.8%. That’s over 10bp more hawkish than before the ECB’s December decision, where rates were cut by 25bps and the bank’s pledge to keep policy “sufficiently restrictive” was removed.

• OIS markets more than fully price 25bp cuts at the January and March ECB gatherings, with 100bps of easing priced through June 2025. Meanwhile, Euribor futures are flat to -2.0 ticks through the blues today.
• Over the weekend, the hawkish Holzmann suggested rates to stimulate the economy would not be the right approach. He noted on Friday that neutral rates are “around 2%”.
• Kazaks also expressed caution with the idea of taking rates below neutral (in his view, “closer to 2% than to 3%”), but remains open to the idea of discussing larger (than 25bp) reductions.
• ECB President Lagarde speaks at a conference on “Annual Economics Conference: Pillars of Resilience Amid Global Geopolitical Shifts” today. Her keynote speech is scheduled for 0815GMT/0915CET.
• The December flash PMIs are also due today, with French data due at 0815GMT, followed by German (0830GMT) and Eurozone-wide (0900GMT) prints.