CHINA: Onshore Weakness Drives USD/CNH to New Highs
USD/CNH spikes to new daily highs, touching 7.3485, but potentially more significantly, the onshore USD/CNY rate breaks above 7.3000 - a long held and long-tested level over the past week or so.
- No specific headline or data driver here, but does coincide with the particularly weak local equity close - we noted earlier that the >5% loss for the CSI-300 was the biggest weekly loss for the index since October 2022.
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BUNDS: Supply, US Data and France politics are at the forefront Today
- Bund sees the December Month still as the most active, but expect for this to start changing into March later today, with the vast majorityl of the Eurex spreads likely fully completed by the end of day.
- Yesterday's support in RXZ4 was seen at 134.94 initially, held Yesterday, and tested overnight, only managed a 134.91 low going into the European Cash session.
- A clear through that area opens back to 134.33.
- The upside is unchanged, while it printed a 135.46 high Yesterday, main target is at 135.72 (2.00% in Yield).
- Today's Services PMIs will be final reading for France, Germany, EU, UK and US, There'll be more focus on the US ADP and especially the US ISM services this afternoon.
- Plenty of Focus on France later this afternoon also, with Barnier set to be ousted.
- SUPPLY: UK £4bn 2031 (equates to 25.2k Gilt) could weigh, German €3.5bn 10yr Bund (equates to 29.9k Bund) could weigh.
- SPEAKERS: ECB Lagarde, Cipollone, Makhlouf, Nagel, BoE Bailey, Fed Powell, Musalem, Barkin, Daly.
BTP TECHS: (H5) Northbound
- RES 4: 123.83 1.764 proj of the Nov 7 - 15 - 18 price swing
- RES 3: 123.43 1.618 proj of the Nov 7 - 15 - 18 price swing
- RES 2: 123.11 1.500 proj of the Nov 7 - 15 - 18 price swing
- RES 1: 123.43 High Dec 3
- PRICE: 122.47 @ Close Dec 4
- SUP 1: 121.75 Low Nov 29
- SUP 2: 120.71 20-day EMA
- SUP 3: 120.05 Low Nov 25
- SUP 4: 119.11 Low Nov 18
BTP futures traded higher yesterday, once again marking an extension of the bull cycle that started Nov 7. The latest rally has resulted in a move through key resistance at 121.97, the Oct 1 high. A clear break of this level highlights an important bullish development and opens 123.11 next, a Fibonacci projection. The trend is overbought and a corrective pullback would allow this condition to unwind. Support to watch is 120.71, the 20-day EMA.
SWEDEN: Steady Long-term Inflation Expectations In “Big” December Survey
5-year ahead CPIF inflation expectations were steady at 2.0% Y/Y in Prospera’s quarterly survey, while shorter horizon expectations were also little changed relative to September. This suggests inflation expectations will continue to play a relatively minor role in shaping near-term Riksbank policy.
- The quarterly survey interviews purchasing managers and social partners alongside the usual money market participants.
- 1-year ahead CPIF expectations were 1.7% Y/Y (vs 1.4% in Sept) and 2-year ahead expectations were 1.9% (vs 1.8% in Sept). There were no major changes relative to September at the participant level (or November, in the case of money market participants).
- 1-year ahead annual wage expectations rose to 3.4% Y/Y (vs 3.2% prior), with 2-year ahead expectations ticking up to 3.1% (vs 3.0% prior). Note that the Riksbank has generally come across as quite relaxed ahead of the upcoming 2025 wage negotiation round.
