Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
RBNZ Cuts Interest Rates Again as Inflation Cools and Recovery Remains Fragile 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
US Gas Market Poised for Supercycle: Bernstein Analysts 
Fed Rate Cut Odds Rise as December Decision Looks Increasingly Divided 
Energy Sector Outlook 2025: AI's Role and Market Dynamics 
Indonesia Aims to Strengthen Rupiah as Central Bank Targets 16,400–16,500 Level 
2025 Market Outlook: Key January Events to Watch 
Stock Futures Dip as Investors Await Key Payrolls Data 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
China's Refining Industry Faces Major Shakeup Amid Challenges 
Bearish EURNZD Scenarios:
1) ECB goes all-in with rates cuts, tiering and QE.
2) Trump proceeds with tariffs on Euro car imports.
3) A no-deal Brexit.
4) Kiwis fiscal easing is accelerated;
5) Housing begins to lift thanks to lower mortgage rates and a winding back of LVR restrictions.
Bullish EURNZD Scenarios:
1) Trump sanctions unilateral FX intervention to weaken USD.
2) A US-China peace treaty on trade.
3) Euro-area economy rebounds to a sustained 1.5%+ growth rate and re-acceleration of CB demand for EUR.
4) The housing market slowdown becomes deeper due to credit tightening by banks;
5) The immigration rolls over more quickly;
6) The global risk assets start to respond more sharply to global trade and growth concerns.
Today’s event highlight is the ECB’s (European central bank) monetary policy meeting, where a 10bps deposit rate cut to - 0.50% is a common consensus, as well as a QE signal. That could hurt the EUR, following the ECB’s surprisingly dovish message in the recent past. For the eurozone, we have lowered our forecast for 2020 from 1.1% to 0.7% as Germany remains in the grey zone between lean growth and recession. The looming protracted economic slowdown suggests more than ever that the ECB will adopt a comprehensive easing package at its next meeting in September. The ECB should lower its deposit rate from -0.4% to -0.6%, introduce a tiered interest rate system to relieve banks of the penalty interest rate and resume net purchases of bonds.
The euro is likely to suffer from the fact that the ECB will resume its net purchases of bonds. We have therefore lowered our year-end forecast for EURNZD from 1.7850 to 1.76 level.
OTC outlook and Hedging Strategy:
Please be noted that the positively skewed IVs (implied volatilities) of 3m tenors signify the hedgers’ interests on both upside and downside risks (refer above nutshell). Bids for OTM calls and OTM put strikes up to 1.76 and 1.67 levels respectively are observed ahead of ECB monetary policy that is scheduled for today.
Contemplating all the above factors, we advocate 3m (1%) in the money delta call options and 2 lots of at the money put options of 1m tenors.
Thereby, in the money call option with a very strong delta will move in tandem with the underlying spot fx in the long term, while ATM Puts for the interim downswings.
Alternatively, we also advocate directional hedges as downside risks in the near terms are foreseen ahead of ECB’s monetary policy, initiate shorts in EURNZD futures contracts of near month expiries and simultaneously, longs in mid-month tenors with a view to arresting major uptrend. Courtesy: Sentrix & JPM
