Chinese Bonds Post Best Returns In Decade With More Gains Seen

Renewed expectations of RBA cuts

Fewer cuts expected from the Fed

Trump, tariffs and China

As a weaker currency is inherently inflationary (via higher import costs), there will surely come a point where a weak Australian dollar becomes a political talking point and the RBA may become less dovish to support the currency. We may not be there yet, but the topic becomes more important the lower the currency falls.

What a load of politics

Australia’s Prime Minister’s term ends on 2025, but due to procedural factors around the Senate half term it is estimated the latest the next election can be is May 17th.  In theory, it could come as early as March. But as both major parties want lower interest rates, I suspect they’ll hold it as late as possible in hope that the RBA may have already cut by then.

However, current Treasurer Jim Chalmers has been busy doing his bit to make sure that cuts arrive by installing allegedly dovish RBA board members. There is some debate as to whether they are more dovish than current board members, but if they have been hand-picked by the government, my bet is that they are. And as the two latest board members come from banking backgrounds, it breaks the mould of the RBA’s ‘steady as she goes’ approach. Therefore, the pressure to cut sooner may already be in play. But as mentioned above, a weak Australian dollar could be the next political hot potato if the downtrend persists for AUD/USD.

It is also not unreasonable to think that Trump will want a weaker US dollar if its current trend continues, later in the year.

Fundamental Analysis

Technical Analysis

Chart 1: EURUSD Monthly Chart

Chart 2: EURUSD Weekly Elliott Wave Analysis

Fundamental Analysis

Elliott Wave Analysis

Chart 1: Gold Futures Monthly Elliott Wave Analysis 

Chart 2: Gold Futures Elliott Wave Analysis on H8 Timeframe

Chart 3: Gold Futures Weekly Elliott Wave Analysis 

Chart 4: Gold Futures Daily and Weekly Chart

The Korean currency dipped further against the U.S. dollar to its lowest level in nearly 16 years Friday amid a deepening political crisis and growth woes.

The Korean won opened at 1,467.5 won per dollar, down 2.7 won from the previous session, and fell further to 1,471.8 won at 9:20 a.m.

It marked the first time that the won fell below the 1,470 won level in terms of intraday trading figures since March 16, 2009, when the reading was quoted at 1,488 won in the aftermath of the global financial crisis.

A political crisis has intensified in Korea as the National Assembly was set to vote on a motion to impeach acting President Han Duck-soo over his refusal to appoint Constitutional Court justices that will adjudicate President Yoon Suk Yeol's impeachment trial.

Earlier, the parliament voted to impeach Yoon for his shocking, albeit short-lived, imposition of martial law on Dec. 3.

Following the martial law fiasco, the currency has been well above the closely watched level of 1,400 won, and Bank of Korea Gov. Rhee Chang-yong has said the currency is forecast to stay around that level for the time being.

The won's weakness also came in line with the continued strengthening of the U.S. dollar, as concerns have deepened over the impact of U.S. President-elect Donald Trump's new tariff policy on Korean industries and the broader economy.

The U.S. Federal Reserve's indication of scaling back the number of rate cuts it anticipated in 2025 to two from the initial four has hammered the won and other Asian currencies.

Financial authorities have vowed to inject unlimited liquidity and implement all measures available to settle the market. (Yonhap)

Source: Koreatimes

(Dec 27): Oil edged lower in light holiday trading on soft US jobs data and a retreat in natural gas futures. 

West Texas Intermediate fell 0.7% to settle below $70 a barrel. US natural gas futures fell by more than 5% Thursday, dragging down the energy complex after forecasts pointed to lower-than-anticipated heating demand. Recurring applications for US unemployment benefits rose to the highest in more than three years, halting a rally in broader markets that also weighed on crude. At the same time, low liquidity exacerbated downward price moves, with aggregate trading volumes of WTI crude trending toward yearly lows.

These developments erased oil’s advance earlier on reports that China is giving local officials more leeway to invest proceeds of government bonds, while keeping interest rates unchanged for now.

Helping to set a floor on prices, the American Petroleum Institute said commercial crude inventories fell 3.2 million barrels last week, which would be the fifth consecutive drop if confirmed by official data. Nationwide stockpiles typically ebb in December, before building in the opening months of the new year.

There’s “not a lot of momentum to carry us into the new year for WTI,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “Traders are looking to January when Trump is inaugurated for the next catalyst. Until then, trading will likely be choppy.”

Crude is headed for a modest annual drop, although prices have been confined to a narrow range since mid-October. Heading into 2025, traders are looking at the possible implications of Donald Trump’s upcoming presidency, Beijing’s efforts to support the economy and prospects for global oil supplies, with OPEC+ planning to loosen curbs only gradually after a series of delays.

Prices:

WTI for February delivery fell by 0.7% to settle at $69.62 a barrel in New York.

Brent for February settlement dipped by 0.4% to settle at $73.26 a barrel.

Source: Theedgemarkets