SNB Held Off On Negative Rates Despite Weakening Inflation, CHF Higher

Key points:

Britons are set to spend 24.6 billion pounds ($32.9 billion) on presents and celebrations over the Christmas period this year, a 3.5% increase on 2024, despite a slow start to festive trading, according to a survey from PwC published on Friday.

With Britain's headline inflation rate running at 3.6% in October, PwC's forecast would indicate flat sales on a volume basis.

PwC said average spending per UK adult is forecast to rise to 461 pounds, with the top priorities being food and drink, Christmas dinner, and health and beauty products.

Of those consumers who said they are planning to spend less, the cost of living was cited as the main reason.

UK CONSUMERS RELUCTANT TO SPEND IN NOVEMBER

Survey data published on Tuesday showed British consumers kept a tight rein on their spending in November as they awaited finance minister Rachel Reeves' budget, while retailers said Black Friday sales disappointed.

Barclays said spending on its credit and debit cards fell by 1.1% in annual terms in November, the biggest drop since February 2021 when the COVID-19 pandemic still raged.

A separate survey from the British Retail Consortium (BRC) trade body showed spending at big retailers rose by 1.4% in annual terms last month, the slowest growth since May.

Analysts have also highlighted that a very mild autumn and early winter has been unhelpful for fashion retailers, particularly for sales of high-ticket items such as coats and boots.

"Post Budget, we should see clarity on personal finances easing some of the caution we have seen this Autumn, which has contributed to a slow start to the critical Golden Quarter for some retailers," Jacqueline Windsor, head of retail at PwC UK, said.

Last month, PwC forecast the steepest year-over-year drop in U.S. holiday spending since the pandemic, primarily fuelled by Gen Z shoppers pulling back amid economic uncertainty.

($1 = 0.7485 pounds)

Source: TradingView

Oil prices are lower this morning despite a less-hawkish-than-feared Fed cut and a double-whammy of relative optimism from OPEC and the IEA...

IEA Trims Oil Glut Forecast as Supply Surge Halts

OilPrice.com's Tsvetana Paraskova reports that the oil market still faces record oversupply next year, according to the monthly report by the International Energy Agency (IEA), but the glut estimate is now trimmed by about 230,000 barrels per day compared to the November forecast.

The market is headed to as much as 3.84 million barrels per day (bpd) of supply exceeding demand in 2026, the IEA said on Thursday in its closely-watched report for December.

While this still is a considerable glut, it's lower than the 4.09 million bpd implied oversupply expected in the November report.

In today's report, the IEA said that the projected global oil surplus in the fourth quarter of 2025 has narrowed since last month's report, "as the relentless surge in global oil supply came to an abrupt halt."

Total global oil supply dipped by 610,000 bpd in November compared to October and by a whopping 1.5 million bpd from September's all-time high, the IEA noted.

OPEC+ accounted for 80% of the decline over October and November, reflecting significant unplanned outages in Kuwait and Kazakhstan, while oil output from sanctions-hit Russia and Venezuela plunged.

Russia's total oil exports are estimated to have plummeted by about 400,000 bpd in November to 6.9 million bpd, as buyers assessed the implications and risks associated with more stringent sanctions.

Buyers, especially in Russia's second-biggest crude oil customer, India, are steering clear of any Rosneft and Lukoil-related cargoes, for fear of running afoul of the U.S. Administration while India and the United States are still locked in difficult trade negotiations.

The IEA noted in its report the apparent disconnect between the current global oil surplus and inventories near decade lows at key pricing hubs.

Despite record volumes of oil piling up on water, benchmark crude oil prices eased only marginally in November, because "in stark contrast to the broader picture, crude and refined product stocks in key pricing hubs have seen only marginal builds," the agency said.

OPEC Holds Firm on Bullish Oil Demand Outlook for 2026

As Charles Kennedy reports at OilPrice.com, global oil demand will rise by about 1.4 million barrels per day (bpd) next year, supported by solid economic growth, OPEC said in its monthly report ton Thursday, keeping its demand forecasts unchanged from last month.

Unlike other forecasters, investment banks, and analysts, OPEC continues to expect robust demand growth in 2026 that will be higher than the estimated increase for 2025 of about 1.3 million bpd, forecasts in the cartel's Monthly Oil Market Report (MOMR) showed on Thursday.

Figures about the balance of supply and demand in OPEC's report also suggest that the cartel expects a balanced market next year.

Demand for crude from the OPEC+ producers is expected at 43.0 million bpd in 2026, up by 60,000 bpd compared to the projection for 2025, OPEC said.

At the same time, crude oil production by the countries in the OPEC+ pact averaged 43.06 million bpd in November, a rise by 43,000 bpd from October, compared to the available secondary sources in OPEC's report.

After December, OPEC+ producers will be pausing their targeted monthly production increases during the first quarter of 2026.

OPEC expects rival non-OPEC+ oil supply to grow by about 600,000 bpd next year, versus growth of some 1 million bpd expected for 2025.

The rise in non-OPEC+ output is expected to be driven by offshore start-ups across Latin America and the Gulf of Mexico, increased NGLs production in the U.S., Argentina's tight oil production, and the scaling of oil sands projects in Canada. Latin America is projected to lead non-OPEC+ growth, accounting for about two-thirds of the total, followed by Canada and the U.S.

This projection, while not new for OPEC, reiterates the cartel's view that U.S. oil production growth will slow down next year.

Signals have started to emerge in the shale patch and from industry executives that WTI crude prices below the $60 per barrel mark will put the brakes on America's shale growth.

Source: Zero Hedge

Key Points:

It's been a choppy week for USD/JPY, with the pair testing resistance at 157 before the Fed's interest rate decision, projections, and dot plot. Since then, the pair has tested support at 155, with softer US jobs data weighing on US dollar demand.

These swings came ahead of the Bank of Japan's highly anticipated interest rate decision on December 19. Expectations of a 25-basis-point rate hike to 0.75% have contributed to the pullback in USD/JPY as market focus shifts from the Fed to the BoJ.

Crucially, market bets on a December BoJ rate hike and Prime Minister Sanae Takaichi's fiscal policy sent 10-year Japanese Government Bond (JGB) yields to their highest level since 2007 before easing back.

10-Year JGB – Quarterly Chart – 121225

Given the BoJ's upcoming monetary policy decision, rising JGB yields, and the Fed's rate-cutting cycle, the short- to medium-term outlook for USD/JPY remains bearish.

Below, I'll discuss the macro backdrop, the near-term price catalysts, and technical levels traders should closely watch.

Japanese Industrial Production in Focus

On Friday, December 12, Japanese industrial production will face scrutiny, given that BoJ Governor Kazuo Ueda saw diminishing US tariff risks to the economy. According to the preliminary report, production increased 1.4% month-on-month in October, after rising 2.6% in September.

A third consecutive month of rising industrial production would reinforce Governor Ueda's view that US tariff risks have softened. Crucially, improving demand would also boost jobs and wage growth. Higher wages would likely fuel consumer spending and demand-driven inflation, supporting a more hawkish BoJ rate path and a stronger yen.

Yen strength would likely keep USD/JPY on a downward trajectory in the run-up to next week's BoJ monetary policy decision, with 155 at risk.

USDJPY – Daily Chart – 121225 – Q3 Close Up

With the markets betting on a December BoJ rate hike, USD/JPY volatility could intensify on US economic data and Fed rhetoric. On the one hand, markets are speculating on how far the BoJ needs to go to reach normalization. On the other hand, incoming US data will fill the US government shutdown-induced data void, which may materially alter the Fed's rate path.

Fed Speakers to Spotlight the Greenback

Later on Friday, traders should closely monitor FOMC members' speeches as the dust settles from Wednesday's monetary policy decision. FOMC members Beth Hammack and Austan Goolsbee are due to speak. Notably, Cleveland Fed President Hammack will become a voting member in 2026, while Chicago Fed President Goolsbee will be an alternative after being a voting member in 2025.

Cleveland Fed President Hammack's views on inflation, the labor market, and the timeline for a rate cut will influence US dollar demand. The FOMC's Dot Plot signaled a single rate cut in 2026. Growing calls for a Q1 2026 rate cut would signal a more dovish Fed rate path. A more dovish Fed policy stance would support a bearish short- to medium-term USD/JPY outlook.

For context, the CME FedWatch Tool gives a 24.4% chance of a January 2026 Fed rate cut, while the probability of a March 2026 cut rose from 42.2% to 49.6% on Thursday, December 11. Traders should closely monitor sentiment toward a Q1 2026 Fed rate cut, which are likely to influence USD/JPY trends.

Technical Outlook: USD/JPY on a Downward Trajectory

With markets focused on rate differentials, technical indicators, and fundamentals will give crucial insights into potential USD/JPY price trends.

Looking at the daily chart, USD/JPY remained above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish bias. While technicals remain bullish, fundamentals are increasingly outweighing the technical structure.

A drop below the 155 support level would open the door to testing the 50-day EMA. If breached, 153 would be the next key support. A sustained break below the 50-day EMA would signal a bearish near-term trend reversal. A near-term bearish trend reversal would expose the 200-day EMA and 150.

USDJPY – Daily Chart – 121225 – EMAs

Position and Upside Risk

In my view, speculation about multiple BoJ rate hikes and a shifting Fed rate path support a bearish short- to medium-term outlook. The BoJ's view on the neutral rate will be crucial for yen demand. USD/JPY would see a sharper drop toward 130 if the BoJ signals a 1.5% neutral rate. The neutral rate is where monetary policy is neither restrictive nor accommodative.

However, upside risks could challenge the bearish outlook. These risks include:

These scenarios would send USD/JPY higher. However, yen intervention threats are likely to cap the upside. USD/JPY topped at a November 20 high of 157.893, based on past communication.

Read the full USD/JPY forecast, including chart setups and trade ideas.

Conclusion: Longer-Term Fall to 140 Hinges on the Dot Plot

In summary, expectations of a BoJ rate hike and an evenly balanced chance of a March 2026 Fed rate cut signal a bearish USD/JPY outlook. Economic indicators and central bank commentary will be crucial in the final weeks of 2025.

Two key questions, beyond the economic calendar, would be:

The likelihood of a dovish incoming Fed Chair and a 1.5% BoJ neutral rate would narrow rate differentials further. Crucially, multiple Fed rate cuts and BoJ rate hikes would support a USD/JPY fall toward 130 over the 6-12 month time horizon.

Source: FX Empire

SoftBank Group Corp. is studying potential acquisitions including data center operator Switch Inc., as billionaire founder Masayoshi Son ramps up the search for deals that can help it ride the AI-fueled boom in digital infrastructure, people with knowledge of the matter said.

The Japanese company has held discussions with Switch leadership and has been conducting due diligence on the closely held company, the people said, asking not to be identified because the information is private. SoftBank also has been in advanced talks on a potential purchase of one of Switch's main private equity backers, New York-listed investment firm DigitalBridge Group Inc., Bloomberg News reported last week.

Son has been looking for ways to play a bigger role in an artificial intelligence race that has elevated SoftBank's longtime business partner Nvidia Corp. to the status of the world's most valuable company. An acquisition of Switch, which specializes in designing and operating energy-efficient data centers, would help the Japanese billionaire control a key bottleneck to AI development.

The owners of Switch have been seeking a valuation of around $50 billion including debt for the data center operator in any deal, some of the people said. They have also simultaneously preparing for a potential initial public offering of Switch as soon as early next year, according to the people. Switch's backers have been considering seeking a valuation of about $60 billion including debt in a stock-market listing of the company, they said.

The SoftBank team often analyzes numerous potential deals in a particular space before deciding which transaction to pursue, and it sometimes decides to do multiple deals in a particular area it wants to rapidly expand in. Acquiring Switch would allow SoftBank to own a large portfolio of data centers outright at a time when demand for their computing power is growing rapidly.

A consortium including DigitalBridge and Australian infrastructure manager IFM Investors Pty bought Switch in a 2022 deal valued at $11 billion including debt.

Shares of DigitalBridge have gained about 35% this year, giving it a market value of $2.8 billion. With about $108 billion of assets under management, it's one of the biggest investment firms focused on digital infrastructure. A deal for DigitalBrige would bring SoftBank expertise in raising large amounts of capital, as well as deep relationships with investors keen to deploy their money in the data center industry.

SoftBank hasn't reached an agreement on terms of a deal, and there's no certainty the discussions will lead to a transaction, the people said. It would likely need to line up significant financing for any acquisition of Switch, which would rank as one of SoftBank's largest deals if it goes ahead.

Representatives for SoftBank, Switch and DigitalBridge declined to comment.

Despite being early to invest in AI technologies, Son has missed much of a global rally that's positioned Nvidia, Taiwan Semiconductor Manufacturing Co. and OpenAI at the forefront of a global boom in machine learning.

This year, however, SoftBank has announced a plethora of moves in the AI arena, including the $500 billion Stargate project alongside OpenAI, Oracle Corp. and Abu Dhabi's MGX to build data centers in the US. But while Son pledged to deploy $100 billion "immediately," the Stargate rollout has been slower than planned.

In recent months, SoftBank bought US chip designer Ampere Computing LLC for $6.5 billion and has committed roughly $30 billion to ChatGPT developer OpenAI. The Tokyo-based company has also proposed a $5.4 billion acquisition of ABB Ltd.'s robotics unit and bought a stake in chipmaker Intel Corp. To finance some of that cost, SoftBank has unloaded its entire Nvidia stake and expanded a margin loan using its Arm Holdings Plc shares. The company's SoftBank Corp. telecom unit is also ramping up spending on its data centers in Japan.

Source: Bloomberg Europe

Prime Minister Mark Carney is a step closer to securing a majority in Canada's Parliament after his Liberal Party gained a defector from the opposition Conservatives for the second time in two months.

Carney's Liberal caucus now has 171 seats of the 343 seats in the House of Commons with lawmaker Michael Ma's move to join his party.

Ma, who represents Markham in the greater Toronto region, said he came to the decision after listening carefully to constituents, and that he entered public service "to help people — to focus on solutions, not division."

The move will escalate questions about the leadership of the rival Conservatives under Pierre Poilievre, who finished second to the Liberals in an election in April.

The Carney government's minority status means it has to fish for opposition votes to pass any piece of legislation, including the government budget. Canada hasn't been ruled by a majority government since 2019.

The Conservatives did not immediately respond to a request for comment. The party lost a Nova Scotia lawmaker to the Liberals in November. Another stepped down without switching sides during the same week.

Source: Bloomberg Europe

U.S. President Donald Trump on Thursday signed an executive order on artificial intelligence that will attempt to preempt a growing number of state laws governing the technology with a national standard.

"We want to have one central source of approval," Trump told reporters, flanked by top advisers, including Treasury Secretary Scott Bessent.

Trump said companies should not have to abide by laws that differ by state.

"You still won't get it approved, if you have to go to 50 states," he said.

The order will give the Trump administration tools to push back on the most "onerous" state regulations, said White House AI adviser David Sacks. The administration will not oppose rules governing AI that relate to child safety, he added.

Major AI players including ChatGPT maker OpenAI, Alphabet's Google, Meta Platforms and venture capital firm Andreessen Horowitz have said the federal government, not states, should regulate the industry.

Yet state leaders from both major political parties have said they need the power to put guardrails around AI, particularly as Congress has consistently failed to pass laws governing the tech industry.

Florida Gov. Ron DeSantis, a Republican, has proposed an AI bill of rights that includes data privacy, parental controls and consumer protections.

California Gov. Gavin Newsom, whose state is home to several major AI companies, signed off on a bill this year requiring major AI developers to explain plans to mitigate potential catastrophic risks.

Other states have passed laws banning AI-generated non-consensual sexual imagery and unauthorized political deepfakes.

Source: Asia_Nikkei