In China, equities are better bid since Chinese authorities pledge on Tuesday to sell a record amount of 3 trillion yuan worth of special treasury bonds next year to give support to the economy. The money would be used to boost consumption and investment. But China’s path to recovery will be bumpy. The data released a few hours earlier showed that the industrial profits continue to plunge. They have been almost 5% lower y-o-y last month. And the workforce in finance and property shrank over the past years for the first time on record; the number of people working for developers dived by 27% since the end of 2023.

Santa is in Japan this Xmas

The Nikkei index surged past the 40’000 mark on the back of a weakening yen as the bears are out and selling the yen since the Bank of Japan (BoJ) bypassed a rate hike earlier this month, and more importantly, said that they would wait until next March/April to have more clarity on how the Trump policies will play out. As such, the USDJPY spent Xmas bumping its head against the 158 offers. Today, the yen looks stronger on the back of a freshly released set of stronger-than-expected economic data showing that inflation in Tokyo rose to 3% in December, while retail sales in the country jumped to 2.8% in November, and the contraction in industrial production unexpectedly slowed during the same month. But the BoJ hawks are hard to convince. As it has been the case for most of 2024, the only thing that cools down the yen selloff is the threat from the Japanese officials to intervene and buy the yen. Therefore, buying the dips in the USDJPY is still interesting, and buying the Japanese stocks remains a popular thing to do.

Elsewhere, in the FX, the US dollar index was mostly steady this week – as most traders in major economies were busy dining and wining in Xmas parties. But the latter didn’t prevent the EURUSD from gently pushing lower on rising – and funded - worries that the newly formed French government will face the same faith than the previous one: a divided government that will unlikely approve a reasonable budget proposal to bring the ballooning deficit toward 5%. And the deficits that spiral higher is generally not great news for the euro as the French-German 10-year spread is preparing to close the year near 80bp – the highest since the European sovereign debt crisis a decade ago.

Across the Channel, hope that 2025 will bring good health to the UK economy - ideally with improved relations with once-loved and cherished ones - persists, but the path remains shaky. Cable has been testing the 1.25 support with a greater chance to break the latter to the downside than otherwise. Elsewjere, the AUDUSD is testing the 62 cents support while the USDCAD is trying to find support near the 1.44 this morning – it looks like Trump’s proposal to make Canada the 51st state of the United States didn’t improve sentiment... The rising political risks in Canada, combined to unsupportive oil prices continue to back a further advance in the USDCAD.

Speaking of oil, it’s the same, old narrative. The barrel makes an attempt above the 50-DMA, but remains topped by offers before reaching the 100-DMA – which currently stands near the $71.30pb level. Yesterday’s API data showed a more than 3-mio barrel retreat in US oil inventories. But the drawback barely vacuumed the bulls in, and the weekly data has little power to reverse the bearish trend that will stay intact below the $72.85pb level, which is the major 38.2% Fibonacci retracement on the latest selloff. Crude is set to close the year in the bearish consolidation zone, still waiting for China to get better and to narrow the global supply glut that’s expected to average near 1mbpd in 2025, according to the IEA.