FRANCE: PM To Speak On Budget Choice At End Of The Day; Both Options Risky (1/2)
Jan-16 12:24
Prime Minister Sebastien Lecornu will speak from Matignon at the end of the day "to present the substantive elements for building an agreement on the 2026 Finance Bill," according to his entourage. This comes as the gov't has failed to convince opposition parties to back its draft state budget (PLF) for 2026. As such, Lecornu is left with the options of enacting a budget via ordinance or using Article 49.3 of the Constitution to push through the budget without a vote in parliament.
- As noted earlier (see FRANCE: Gov't Suspends Budget Debates, Use Article 49.3 Or Ordinances Looming) the actions of the centre-left Socialist Party (PS) remain key as to the future of the budget, and indeed the Lecornu gov't.
- Le Figaro reports that according to a source close to the PM "'There will be no final budget before the first half of February, regardless of the method.' This is either because executive orders, which require starting from the government's initial budget proposal, would necessitate a supplementary budget bill (PLFR) to incorporate elements negotiated with the opposition; or because invoking Article 49.3 would trigger a parliamentary process with unavoidable delays and would also require additional regulatory action."
- If the gov't pursues the implementation by ordinance option under Art. 47, Le Monde reports the likely procedure would be for the Council of State deliver a legal opinion, this is then debated by the Council of Ministers, and then the order is signed by President Emmanuel Macron. The opposition would almost certainly move a censure motion immediately, but there must be 48 hours between the tabling of a censure motion and the vote, allowing time for the ordinance to be enforced.
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OUTLOOK: Price Signal Summary - Bear Cycle In Bunds Remains Intact
Dec-17 12:20
- In the FI space, Bund futures are in consolidation mode. A bear cycle is intact and the contract is trading closer to its recent lows. Scope is seen for an extension towards the 127.00 handle. Key short-term resistance is 128.75, the Dec 3 high. Note that the contract is still oversold. A stronger corrective bounce would allow this oversold condition to unwind. The price pattern on Dec 10 is a doji candle - a short-term reversal signal.
- Recent activity in Gilt futures highlights 90.50, the Dec 16 low, and 91.93, the Nov 27 high, as two important short-term directional triggers. A clear breach of 90.50 would signal scope for a deeper retracement towards 89.86, the Nov 19 low and bear trigger. For bulls, a stronger resumption of gains and a breach of 91.93, would instead signal scope for a climb towards resistance at 92.55, the Nov 11 high.
NOK: EURNOK Rally Stalls At 12.000, Hawkish Risks To Norges Bank Decision
Dec-17 12:19
EURNOK’s impressive rally since last Thursday’s soft Regional Network survey has stalled at the 12.0000 figure. Although we expect a dovish revision to Norges Bank’s December MPR rate path tomorrow, recent price action suggests NOK FX will be more sensitive to a smaller-than-expected downward revision relative to September.
- If Norges Bank’s decision is interpreted as less dovish expected, initial downside focus in EURNOK will be on the prior breakout level of 11.8612 (Nov 25 high). This level shields the 20-day EMA at 11.8123.
- Overnight EURNOK implied vols are well bid with the ECB decision also due tomorrow, currently at the highest since late October. That pushes the breakeven on an overnight ATM straddle expiring at tomorrow’s NY cut to around 0.45%.
- Norges Bank’s decision is due at 0900GMT/1000CET, just 30 minutes after the Riksbank.
- See our previews for tomorrow’s Scandi decisions here:
Figure 1: EURNOK Since June 2023 (Source: Bloomberg Finance L.P)
OPTIONS: Larger FX Option Pipeline
Dec-17 12:19
- EUR/USD: Dec18 $1.1550(E1.9bln), $1.1600(E1.3bln), $1.1700(E1.2bln), $1.1750(E2.7bln), $1.1797-00(E1.2bln), $1.2000(E1.9bln); Dec19 $1.1500(E3.0bln), $1.1650(E1.2bln), $1.1675-80(E2.2bln), $1.1750-60(E3.5bln), $1.1785-00(E4.6bln), $1.1850(E1.7bln), $1.1900(E2.0bln), $1.2000(E3.2bln); Dec22 $1.1675($1.2bln), $1.1700(E1.3bln)
- USD/JPY: Dec18 Y155.00($3.4bln), Y156.00($3.1bln), Y156.25($2.3bln), Y157.00($4.0bln), Y158.00($4.8bln), Y158.50($1.9bln), Y159.00($6.5bln); Dec19 Y155.00($2.0bln)
- EUR/GBP: Dec19 Gbp0.8800(E1.3bln), Gbp0.9000(E1.4bln)
- AUD/USD: Dec18 $0.6540-50(A$1.6bln), $0.6665-75(A$1.3bln); Dec19 $0.6675(A$1.1bln), $0.6700(A$1.6bln)
- AUD/NZD: Dec18 N$1.1410(A$1.5bln); Dec19 N$1.1300(A$1.1bln)
- USD/CAD: Dec19 C$1.3800($940mln), C$1.3825($1.7bln), C$1.3900($1.7bln), C$1.3950($1.2bln), C$1.4000($1.5bln)
