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South Korea Signals Possible Interest Rate Hike as Inflation Remains Elevated 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
Fed Chair Kevin Warsh Signals Policy Overhaul as Hawkish Rate Outlook Rattles Markets 
BOJ Raises Interest Rates to 1% as Inflation Pressures Persist 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
ECB Keeps July Rate Options Open Amid Iran War Energy Price Risks 
Stock Futures Dip as Investors Await Key Payrolls Data 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
BoE Policymaker Alan Taylor Signals No Need for Interest Rate Hike Amid Iran War Inflation Risks 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
BOJ Rate Hike Expectations Rise as Weak Yen and Strong U.S. Jobs Data Increase Pressure 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
A few more central banks tiptoe to the exit 2017 was the year in which more central banks broke ranks. We expect this to continue in 2018. The Fed will hike four times and the BoC two, which supports long positions in USD and CAD.
EUR should benefit from the prospect of the ECB completing QE just as it rallied on the expectation of tapering this year.
We pair EUR vs NZD to neutralize the risk to EURUSD from a further repricing of the Fed. The RBNZ is an unlikely candidate to signal tighter policy as the slowdown in migration intensifies the downturn in housing and argues against a policy response to upside inflation risks from minimum wage increase etc. The 3m window KO halves the premium compared to a digital call.
In Sweden, the prospects of a policy pivot were delayed not derailed this year. EURSEK is currently overshooting cyclicals by over 4% the most since 2010. The rebound in inflation to 2.0% in November reduces the risk of the central bank extending QE again next week (this was 0.3% ppt higher than the Riksbank's estimate), although it could still push back the lift-off point for rates by a quarter to 3Q18 in order to better align itself with the ECB’s extension of QE through September.
Long a 9-mo 1.80 EURNZD digital call with a 3m 1.80 window KO. Paid 17.5% on November 21. Marked at 19.04%.
Long a 6m 9.60 EUR put/SEK call. Paid 57.2bp November 21. Revalued at 52bp.
We advocate deploying shorts in futures contracts of near-month tenors with a view to arresting further potential bearish risks of USDCAD, alternatively, we advocate buying USDCAD 3m risk reversal strikes 1.3440/1.2450 (at spot ref: 1.2068).
