In today’s briefing:
- China’s Consumption Push: Will It Take Off?
- HEW: Dovish Data Dumps
- Momentum Without Muscle: Why Iron Ore’s Recent Strength May Not Last
- BOJ: Measured Steps Toward Normalisation
- More Hikes to Come in 2026-2027
- Oil futures: Crude heads for weekly losses on oversupply concerns
- CX Daily: How an Acclaimed Education Experiment in Beijing Ended Up on the Brink
- Mexico: Closing the Easing Door
- Middle East FX (December 19th 2025)
China’s Consumption Push: Will It Take Off?
- China’s low consumption ratio is driven by structural constraints—stagnant labour income, early and rapid household leverage, heavy debt burdens, declining workforce and persistent precautionary saving
- Such constraints on household consumption mean recent policy announcements to expand overall domestic demand will take longer than expected to deliver a durable consumption-driven Chinese economy
- China’s ten-year bond yield appears to recognise this reality, pricing in persistently weak nominal growth and subdued domestic demand rather than a consumption-driven reacceleration. It is now lower than Japan
HEW: Dovish Data Dumps
- Inflation data broadly disappointed expectations over the past week. The labour market news was more mixed, but higher UK and US unemployment rates raise eyebrows.
- Policymakers behaved themselves, with no surprises and wide dispersion, including a BOJ hike, while the BoE delivered the finely balanced hawkish cut we expected.
- The release calendar adopts a holiday stance for the next few weeks, with only UK and US Q3 GDP data out before Christmas. This publication will be back on 9 January.
Momentum Without Muscle: Why Iron Ore’s Recent Strength May Not Last
- Iron ore’s resilience looks fragile, supported by short-term supply disruptions, while weakening steel demand and looming Simandou volumes erode fundamentals.
- Managed money participants trimmed their net long exposure, signalling profit-taking aligned with price action rather than a broader shift in market conviction.
- The DCE-SGX spread lost momentum after rejecting the upper Bollinger band, breaking below key MAs and opening room for consolidation or further downside.
BOJ: Measured Steps Toward Normalisation
- A hike to 0.75% was delivered as expected, reflecting confidence in wage-led inflation momentum, though real rates remain deeply negative and uncertainty around trade policy and wage sustainability persists.
- Future tightening hinges critically on 2026 spring wage negotiations reaching 5%+ and underlying inflation remaining firm as food-price effects wane. Some dissenting board members questioned inflation’s near-term durability.
- Real interest rates at significantly negative levels permit gradual tightening toward the estimated 1-2.5% neutral range, with markets pricing 1.0% by mid-2026. Limited runway and external risks may constrain the pace of normalisation.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
More Hikes to Come in 2026-2027
- BoJ signals that the next hike will not be the last, with Governor Ueda hinting that policy rates will continue to rise as long as the current economic outlook holds.
- Yen weakness and fiscal easing are emerging concerns for the BoJ, potentially keeping inflation elevated and increasing the risk of a faster tightening cycle.
- October 2026 remains our baseline for the next hike. Risks are skewed toward an earlier move though, as soon as July 2026.
Oil futures: Crude heads for weekly losses on oversupply concerns
- Crude oil futures were edging higher Friday, but broader concerns over a looming surplus in the new year left prices softer on the week and languishing at just above post-pandemic lows.
- Front-month Feb26 ICE Brent futures were trading at $60.47/b (2007 GMT) versus Thursday’s settle of $59.82/b, while Feb26 NYMEX WTI was at $56.54/b against a previous close of $56/b.
- Markets found only limited support over the week from geopolitical events, with the IEA’s forecast of a near 4 million bpd glut in 2026 supressing prices.
CX Daily: How an Acclaimed Education Experiment in Beijing Ended Up on the Brink
- In Depth: How an Acclaimed Education Experiment in Beijing Ended Up on the Brink
- On the newly renovated campus of ETU Enlighten School, the laughter of a dozen students playing on a crisp early winter day belies a profound crisis.
- Inside, their teachers are waiting on months of unpaid salaries.
Mexico: Closing the Easing Door
- Banxico cut by 25bp to 7%, broadly in line with expectations, but signalled a de facto pause with a more data‑dependent approach to future easing.
- Sticky core inflation and upward‑revised forecasts for early 2026 mean additional cuts are unlikely before mid‑2026, keeping real rates above neutral for now.
- A 4–1 split vote and fiscal/trade‑related upside risks to inflation argue for a prolonged hold in Q1 2026, limiting the scope and speed of the remaining easing cycle.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
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