SOUTH KOREA: Yoon To Attend Court Tomorrow Amid Heightened Political Tensions
President Yoon Suk-yeol is set to appear in front of the Constitutional Court for a second time on Thursday 23 January with the court to begin calling senior witnesses allegedly involved in Yoon's aborted declaration of martial law in December. Earlier today, Yoon's legal team said "As of now, we plan to attend all [trial dates] if possible." The country remains in a state of elevated political tension following the high-profile storming by the president's supporters of the courthouse where Yoon's detention was extended on 19 Jan.
- Yoon's attendance at the trial contrasts with his stance towards the Corruption Investigation Office for High-ranking Officials (CIO). Earlier today investigators confirmed they had failed in a third attempt to forcibly bring Yoon in for questioning from the detention centre where he is currently being held. Yoon has not sat for questioning since he was detained last week and has exercised his right to remain silent throughout.
- Yonhap reports that former Minister of National Defense Kim Yong-hyun is set to appear as a witness at 1430 local time (0230ET/0730GMT).
- The impeachment trial will take a break next week for Korean Lunar New Year, resuming on 4 Feb. Trial dates are currently scheduled for each Tuesday and Thursday until 13 Feb, but more can be added depending on the number of witnesses called. The court must make a decision on impeachment by 12 June, 180 days after the impeachment vote in the National Assembly.
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STIR: Just Under 120bp Of '25 ECB Cuts Priced
ECB-dated OIS shows ~118bp of cuts through ’25 vs. ~119bp late on Friday, while Euribor futures are 0.5-3.5 lower.
- Some are attributing the modest hawkish repricing to comments made by ECB President Lagarde.
- Lagarde told the FT that “we’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%. I’m saying that with a little reservation because I still believe that we should be very vigilant about services.”
- While the caution surrounding services inflation is worth noting, it isn’t a new source of information and has factored heavily into discussions at various stages of the ECB’s current easing cycle. She also stressed the progress towards the Bank’s inflation goal.
- As such, we don’t think this should be a major driver for STIR repricing, with weakness on EGB curves seemingly more of a driver when it comes to this morning’s moves.
- Elsewhere, ECB GC member Makhlouf reiterated his preference for 25bp cuts (pointing to heightened uncertainty in ’25).
- Meanwhile fellow GC member Vujcic stressed that the direction of policy rates is clear (signalling further cuts), noting that the evolution of data and degree of policy transmission will determine the longevity of the Bank’s cutting cycle.
- Little of note on the European calendar for the remainder of the week, which will leave focus on macro headline flow.
- A reminder that the Christmas holiday period will result in adjusted hours and closures as well as reduced liquidity and volume.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jan-25 | 2.637 | -27.9 |
Mar-25 | 2.325 | -59.1 |
Apr-25 | 2.079 | -83.8 |
Jun-25 | 1.915 | -100.1 |
Jul-25 | 1.849 | -106.8 |
Sep-25 | 1.796 | -112.0 |
Oct-25 | 1.769 | -114.8 |
Dec-25 | 1.733 | -118.3 |
EURIBOR OPTIONS: Upside ERG5/ERF5 Structure Lifted
2x ERG5 98.25 calls lifted vs. 1x ERF5 97.87 calls, with paper paying 1.0 on 6.25K for the G5. ERH5 last 97.705.
FOREX: EUR Edges Lower, But FX Ranges Largely Contained
Moving inline with the weakness for European bonds, the single currency has edged lower to be the session's poorest performer, although price action remains muted and ranges well contained.
- Having traded 0.8315 overnight, EUR/GBP is back to negative on the day - having reversed ahead of any test on the 50-dma at 0.8319 - a level markets have failed to break on three occasions in the past week or so.
- EUR/NOK is lower for a second session, extending the reversal off the post-Norges Bank high to just over 1%. Rate is now meeting support at the confluence of the 50-, 100-dmas of 11.7666/65.
- The greenback is more mixed. The USD Index is very mildly higher, but is holding the majority of Friday's slippage - leaving 108.541 the key level ahead.
- As a gauge of lighter volumes and limited liquidity today: EUR futures have traded volumes ~20% below average for this time of day, GBP ~50% lower and JPY ~40% lower.
