BRAZIL: President Lula Says Currency Now Adjusting

• On the commodity front, Gold is unchanged. A bear threat remains present despite the latest recovery. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low. The first firm support to watch is $2583.6, the Dec 19 low. On the upside, a resumption of gains would instead signal scope for a climb towards resistance at $2726.2, the Dec 12 high.
• In the oil space WTI futures are holding on to the bulk of their recent gains. A stronger reversal to the upside has exposed key short-term resistance at $76.41, the Oct 8 high. On the downside, a reversal lower would expose key support at the 20-day EMA, at $70.78.

Reuters report comments from the Slovak gov't office stating that PM Robert Fico will hold talks with representatives from the European Commission regarding natural gas supplies on 9 January. A meeting involving officials from Slovakia, the Commission, and Ukraine had been sure to take place today (7 Jan). However, the Slovakian gov't claims it was cancelled by the Commission due to Ukrainian officials being unable to attend in person. 

• Reuters reported on 6 Jan, "Fico has accused Kyiv of damaging Slovakia by not extending a transit deal for Russian gas, and has threatened to cut electricity flows to Ukraine and reduce aid for its refugees. Kyiv has said the end of gas transit deprives Moscow of revenue as long as Russia continues to attack Ukraine. Slovakia has arranged alternative gas sources and routes, but Fico has argued that the end of Ukraine's transit of Russian gas meant that Slovakia lost its own transit revenue and had to pay more to bring gas from elsewhere."
• Fico's meeting with Russian President Vladimir Putin in Moscow in December has drawn criticism domestically and in Ukraine. He is the third EU member state leader to meet with Putin since the full-scale invasion of Ukraine after Hungarian PM Viktor Orban and outgoing Austrian Chancellor Karl Nehammer.
• A Commission spox said on 6 Jan that “there are no security supply issues or concerns for the European Union following the end of the transit.”
   

Looking at the details of the Swiss December inflation data shows a solid slowdown in the services CPI contribution (-0.126pp vs November) which, however, was almost exclusively driven by transport services; core inflation almost rounded down to 0.6%, making up for an overall soft release.

• Transport service inflation declined sharply to -1.4% Y/Y (3.3% prior), its lowest value since June 2021. Its contribution to headline decreased by 0.120pp vs November. Higher car fuel inflation could not outweigh that in the overall transport category.
• This means that the mid-term trend of lower services ex-rents contributions to headline remains intact - see the dark blue bars in the chart below.
• Further details see table.
• Also note that the consensus estimate was upwardly skewed (0.6% median but a number of analysts expecting a higher headline figure), so even though headline came in in line with consensus, it remained below the mean estimate (0.63% vs 0.65% mean est).
• The Swiss Franc saw some weakness on the back of the release, most notable in EURCHF, which is approaching the Nov 04 high of 0.9447 in a move further underpinned by strength for the single currency today. A continuation of the EURCHF rally would place the technical focus on a cluster of September highs around the 0.95 handle.