POWER: French Spot Power Index Settled at Discount to Germany

• On the commodity front, a bull cycle in Gold remains in play. Last week’s extension higher resulted in a print above $2790.1, to record a fresh all-time high. The climb confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Attention is on $2817.6 next, the 1.236 projection of the Nov 14 - Dec 12 - 19 price swing. The first key support to watch is $2687.5, the 50-day EMA. The 20-day EMA is at $2728.1.
• In the oil space, last week’s move down in WTI futures marked an extension of the current corrective cycle. The 20-day EMA has been breached and attention is on support around the 50-day EMA, at $72.26. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance.

• Fed Funds implied rates clearly show the initially inflationary aspects of President Trump actually imposing long-threatened tariffs over the weekend (to be effective Feb 4).
• The near-term inflationary/longer-term growth negative angle can be seen in SOFR futures, with the Sep’25 yield 6bps higher, Dec’26 unchanged and declines further out in the greens and beyond.
• Cumulative cuts from 4.33% effective: 4bp Mar, 9.5bp May, 18.5bp Jun, 23.5bp Jul, 30bp Sep, 39bp Dec.
• The March rate is 1.5bp higher, June 5.5bp higher and Dec 8.5bp higher from Friday’s close. It sees a next 25bp Fed cut now priced for September whilst the 39bp of cuts for 2025 has more than reversed last Monday’s slide on DeepSeek driven risk-off.
• The latter sits between recent extremes of 24bp seen in the aftermath of a strong payrolls report and 54bp on last week’s US tech-led slide.
• Today’s scheduled Fedspeak comes from Bostic (non-voter) on the economic outlook at 1230ET (Q&A only) before Musalem (’25 voter) at 1830ET limited to welcoming remarks.
• Bostic’s last public comments were recorded on Dec 9 (pre the Dec 17-18 FOMC meeting) but only released on Jan 7. He pushed the need for caution: “Given that kind of bumpiness in the measures, I think that will call for our policy approach to be more cautious […] And if we’ve got to err, I would err on the upside. I would want to make sure—for sure—that inflation gets to 2 percent, which means we may have to keep our policy rate higher longer than people might expect, or we may have to be more deliberate in the pacing of reducing our policy.”

Subdued risk sentiment following weekend tariff developments have weighed on the risk-sensitive Scandi FX, albeit to a lesser extent than AUD and NZD. NOK has been a little more insulated than SEK, supported by an uptick in crude oil and natural gas futures. 

• Norway is also less exposed to US trade than Sweden (see table), likely providing support (vs SEK) on the margin, and reducing NOK co-movement with EUR intraday.
• NOKSEK has moved away from session highs of 0.9835, but is still up 0.2% today, on track for a fifth consecutive positive session. The cross has traded within a relatively contained range of 0.9706 and 0.9859 this year, and these levels represent initial support/resistance.
• This week’s Scandinavian calendar is headlined by the January Riksbank minutes (tomorrow at 0830GMT/0930CET). This release may provide a clearer signal on the rate outlook than the decision itself, given the non-committal policy statement guidance.