SPAIN DATA: Q4 Flash GDP Firmer Than Consensus
Spain Q4 flash GDP was stronger than consensus at 0.8% Q/Q (vs 0.6% consensus, 0.8% prior) and 3.5% Y/Y (vs 3.2% consensus, 3.5% revised prior from 3.3%). Spanish outperformance versus other key Eurozone countries has been highlighted in survey evidence, with the December composite PMI the highest since March 2023.
- Growth continued to be driven by domestic demand, which contributed 1.2pp to the Q/Q print (vs 1.0pp in Q3). External demand contributed negatively 0.4pp.
- Household consumption grew 1.0%Q/Q while gross fixed capital formation was very strong, increasing 3.4%Q/Q and more than offsetting the 1.4%Q/Q fall seen in Q3. Within this, tangible fixed assets (ex-housing and ex-construction) grew 7.6%Q/Q.
- Export growth was 0.1% Q/Q (vs 0.4% in Q3), whilst imports grew 1.3% Q/Q (vs 0.9% in Q3).
- Gross valued added was positive in all major sectors (industrial, construction and services), but negative in the primary sector.
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US: Trump Escalates Calls For Congress To Raise Debt Limit
US President-elect Donald Trump has escalated calls for Congress to raise the federal debt limit ahead of his inauguration on January 20, describing a 2023 deal between President Joe Biden and former House Speaker Kevin McCarthy (R) as, "one of the dumbest political decisions made in years." Under the terms of the Biden-McCarthy deal, the debt ceiling was suspended until Jan 1, 2025, in exchange for a mechanism to limit some government spending, known as the Fiscal Responsibility Act.
- Trump said of the 2023 deal, in a Truth Social statement: "There was no reason to do it... The Democrats must be forced to take a vote on this treacherous issue NOW, during the Biden Administration, and not in June. They should be blamed for this potential disaster, not the Republicans!"
- Treasury Secretary Janet Yellen said in a letter to Congressional leaders on Friday that, due to a USD$54 billion decrease in outstanding debt, the Treasury "currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures." Those measures are likely to postpone hitting the debt limit until late Spring.
- Although suspending the debt limit has long been a Democrat priority, Democrats are unlikely to agree to a bipartisan measure without significant policy concessions. The most likely option for Congressional Republicans is to attach a debt limit hike to a partisan reconciliation package on energy and border security, adding another complication to Trump's legislative agenda.
USDCAD TECHS: Bullish Flag Formation
- RES 4: 1.4578 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4404 @ 08:19 GMT Dec 30
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4269/4093 20- and 50-day EMA values
- SUP 3: 1.4011 Low Dec 5
- SUP 4: 1.3928 Low Nov 25 and a key support
USDCAD bulls remain in the driver’s seat and the pair is holding on to the bulk of its recent gains. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4269, the 20-day EMA. A pullback would be considered corrective.
KOF December Deterioration Was Broad-Based
The Swiss KOF Economic Barometer dropped to 99.5 in December, below consensus of 101.0 as well as November's 102.9 (upwardly revised by 1.1). This is the lowest index value since January.
- "The indicator bundles included in the Economic Barometer all contribute to the negative development. In particular, the indicator bundles for manufacturing and for other services, as well as the indicator bundles for the hospitality industry, for foreign demand and for private consumption decrease considerably.", KOF adds.
- Note that the SNB slightly lowered its 2025 growth outlook for the Swiss economy at its December meeting - to between 1.0% to 1.5% (from a prior 1.5% point estimate) despite a significantly lower policy rate. The SNB sees the largest risks from weaker international developments.
