GREECE T-BILL AUCTION PREVIEW: On offer next week

• Tariff rhetoric overnight has provided some renewed demand for the greenback, and this has allowed GBPUSD to soften around 0.6% on Tuesday, pressing fresh session lows around 1.2420 in recent trade. Significantly, cable tested resistance at the 50-day EMA on Monday (intersecting today at 1.2520), and with this level holding, medium-term signals remain bearish for the pair.
• Key event risk for the pair centres around the FOMC press conference, while support levels remain much lower than current spot, initially at 1.2229, the Jan 21 low, and the bear trigger at 1.2100, the Jan 10 low.
• Fiscal matters remain in the spotlight this week with Chancellor of the Exchequer Rachel Reeves due to deliver a speech on Wednesday regarding how the government intends to boost economic growth, with a focus on planning reforms to boost house construction.
• This week will also see four members of the FPC (including Governor Bailey) testify, however comments will need to be constrained to financial stability matters given the monetary policy quiet period.

EXECUTIVE SUMMARY: 

• Consensus has shifted more concretely towards a 25bp Riksbank cut in January, which would bring the policy rate to 2.25%. The December meeting minutes highlighted more appetite for earlier cuts than the decision itself suggested, with Breman, Jansson and Bunge signalling a willingness to cut rates in early 2025. Data outturns since December have also supported such an approach.
• Only a concise “Monetary Policy Update” will be presented in January, with no updated rate path or MPR. Should a 25bp cut be delivered, it would bring the policy rate in line with the “terminal rate” of the December path. That raises the obvious question of what the March MPR rate path will look like.
• Overall, we continue to believe the Riksbank will be happy to cut rates below 2.25% if justified by the incoming data. However, the Executive Board will likely want to take some time to assess the impact of prior rate cuts and trade policy uncertainty on domestic activity before cutting meaningfully below this level (e.g. below 2%). As such, we think the most likely outcome of the January decision is a “hawkish cut”. We think the policy statement will continue stressing the need for a tentative approach, and we don’t expect it contain meeting-specific forward guidance.
• Analysts are almost unanimous in expecting a 25bp cut. Expectations around the policy statement guidance are more mixed, with some looking for the Riksbank to signal another cut is likely in H1 ’25, and others not expecting any hints. 

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• In the FI space, the pullback from recent highs in Bund futures appears corrective and a short-term bull cycle remains in play - for now. The Jan 15 rally highlighted a reversal signal - a bullish engulfing candle. It continues to suggest scope for a corrective phase that is allowing an oversold trend condition to unwind. Sights are on 132.10, the 20-day EMA. A clear breach of the average would strengthen the bullish theme. The bear trigger is 130.28, the Jan 15 low. Initial support lies at 131.00, the Jan 16 / 24 low.
• The medium-term trend condition in Gilt futures remains bearish. However, recent gains continue to highlight a corrective phase and signal scope for a continuation higher near-term. The contract has traded through the 20-day EMA, at 91.76. The focus is on 92.75, the 50.0% retracement of the Dec 3 - Jan 13 bear leg. Initial support is at 91.10, the Jan 20 low.