POWER: German DA Holds Premium to France, May Flip to Discount for 31 Jan
As anticipated in yesterday's MNI analysis, German and French spot prices continued to rise, with Germany maintaining its premium over France. However, for 31 Jan delivery, Germany may shift to a discount compared to France, driven by higher load factors of wind and forecasts for a decline in power consumption. Meanwhile, French demand is expected to increase, creating a divergence in consumption patterns between the two countries.
- The German day-ahead spot settled at €131.53/MWh from €108.14/MWh on the previous day.
- The French day-ahead spot cleared at €107.86/MWh from €72.77/MWh on the previous day.
- Germany was at a €23.67/MWh premium from a €35.37/MWh premium in the previous session.
- Wind output in Germany is forecast to fall to 13.01GW during base load on Thursday, down from 28.71GW on Wednesday, according to SpotRenewables.
- Wind will then be at 13.53GW, or 21% load factor the next day.
- Power demand in Germany is forecast to decline to 60.65GW on Thursday, down from 61.16GW on Wednesday amid mean temperatures in Dusseldorf forecasts to decline to 6C on Thursday from 7.2C on Wednesday, according to Bloomberg.
- German demand will then be at 59.63GW on 31 January.
- Residual load in Germany is forecast to increase to 44.49GWh/h on Thursday, up from 25.68GWh/h on Wednesday according to Reuters.
- In contrast, wind output in France is forecast to decrease to 5.74GW during base load on Thursday, down from 11.01GW on Wednesday according to SpotRenewables.
- Wind will then be at 2.61GW, or a 11% load factor on 31 January.
- Power demand in France is forecast to increase to 64.45GW on Thursday, from 63.34GW on Wednesday as mean temperatures in Paris are forecast to decline to 6.2C on Thursday, from 7.3C on Wednesday, according to Bloomberg.
- French power demand will then be at 66.46GW the next day.
- Residual load in France is forecast to increase to 56.29GWh/h on Thursday, up from 50.19GWh/h on Wednesday according to Reuters.
- Nuclear availability in France increased to 86% of capacity as of Wednesday morning, up from 81% on Tuesday morning, RTE data showed, cited by Bloomberg.
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US TSYS: Tsys Unwinding Friday's Sale, PMI, Pending Home Sales Ahead Year End
- Treasuries are looking modestly firmer, near early early London session highs as rates recover from Friday's sell-off. The Mar'25 10Y contract trades 108-19 last (+5) vs. 108-21 high on decent volumes heading into year end: just over 175k at the moment.
- Average to small year-end duration extensions: US +0.07Y, EU: +0.04Y, UK -.02Y (Bbg)
- Tsy 10Y yield at 4.5951% (-.0303), curves mixed with 2s10s -.342 at 28.950 despite overnight Block steepener: +4,276 TUH5 at 102-22.75 vs. -2,592 TYH5 108-17.5 (0256:12ET); 5s30s +1.752 at 37.159.
- Projected rate cuts into early 2025 look steady to slightly higher vs. late Friday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -13.6bp (-13.3bp), May'25 -19.5bp (-18.5bp), Jun'25 -28.8bp (-26.5bp).
- Data on tap (prior, estimate): MNI Chicago PMI (40.2, 43.0) at 0945ET, followed by Pending Home Sales at 1000ET MoM (2.0%, 0.8%), YoY (6.6%, 7.9%). Dallas Fed Mfg Activity at 1030ET (-2.7, -3.0). Dearth of scheduled Fed speak until Richmond Fed's Barkin gives keynote remarks at a Maryland Bankers assn event on January 3 at 1100ET (text & Q&A).
- Treasury auctions $84B 13W, $72B 26W bills at 1130ET followed by 75B 42D CMBs at 1300ET.
EUROPEAN INFLATION: Portugal HICP Accelerates, Core CPI Also Higher
Portugal HICP rose to 3.1% Y/Y in December, its highest since June 2024 and notably above November's 2.7%. The national CPI measure also saw some acceleration, both on headline (3.01% vs 2.47% Nov) as well as on core (2.80% vs 2.61% Nov). Behind the higher CPI headline, Statistics Portugal identifies energy and unprocessed food as the predominant drivers.
- Specifically, energy CPI came in at 4.89% Y/Y (2.14% Nov, mainly driven by base effects as M/M this was +0.43%), while unprocessed food CPI was 3.42% Y/Y (1.95% prior, again partially a base effect as this was +0.50%M/M).
- CPI excl. housing accelerated just over 0.5pp, as headline, indicating that rental inflation saw a similar increase to the wider index (+0.10% M/M).
- For reference, Portugal contributes 2.4% to the overall Eurozone HICP 2024 basket.
- December flash inflation data for Ireland will be released tomorrow, with the other major releases of the December round out next week. Belgium HICP already came in at 4.4% Y/Y, decelerating four tenths vs November, while Spain HICP surprised consensus to the upside earlier today (2.8% Y/Y vs 2.6% cons).
FOREX: Greenback at Session Lows Into NY Hours
Greenback headed into the NY crossover at the session's lowest levels - while FX markets seemed to shrug off the recovery in yields into the Friday close, the dollar's certainly chasing the US 10y yield lower so far today, with EUR/USD through to print 1.0450 and GBP/USD just above the 1.2600 handle.
- For EUR/USD specifically, price has risen above the 50% retracement of the post-Fed price action at 1.0428 - making 1.0473 the next intraday level of interest on rallies.
- While FX volumes headed through the European morning at very low levels, they've caught up slightly into US trade, with the activity deficit dropping to 5-10% on the day, from ~30% at the European open.
- Despite the USD pullback, price action lacks much conviction here, with daily AUD/USD chart showing the price still well within range of cycle lows at the bear trigger of 0.6199.
