<p style=““ class=“text-align-justify“>The energy crunch in Europe has been a key story since the Russia-Ukraine conflict and there were major worries in the past few months over how things are going to play out during the winter. The good news is that milder weather has helped with the situation, meaning fewer households have been cranking up the heat this December.</p><p style=““ class=“text-align-justify“>The data from Gas Infrastructure Europe showed Germany’s gas storage to be at 88.2% full as of Tuesday, up some 1% from the week before.</p><p style=““ class=“text-align-justify“>Of note, gas demand in Germany fell to a six-week low over the Christmas weekend – clocking in at just 2.2 TWh/day according to THE.</p><p style=““ class=“text-align-justify“>As for why this is relevant, it is because Germany is Europe’s biggest consumer of gas and as storage levels are able to keep sufficiently high, it means a reduced probability of shortages. In turn, that will also help reflect lower gas prices – which will be a welcome development for households in general.</p><p style=““ class=“text-align-justify“>For now, it is still early as gas consumption will continue to dwindle down the storage levels all the way through spring before being replenished in the autumn again.</p><p style=““ class=“text-align-justify“>/<a target=“_blank“ href=“https://www.forexlive.com/terms/e/eur/“ target=“_blank“ id=“b0427fd7-674c-4ad1-b689-22d1f8b087b0_1″ class=“terms__main-term“>EUR</a></p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>This ties in to the decision from mainland China yesterday, with the Hong Kong government also set to drop its Covid vaccine pass scheme starting from Thursday.</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/china-takes-the-final-step-to-embrace-living-with-covid-20221227/“ target=“_blank“ rel=“follow“>China takes the final step to embrace living with Covid</a></li></ul>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>If you think back to eight to ten years back, the European economy was in a massive blackhole – having to deal with the sovereign debt crisis, threats to the Eurozone breaking up, and weakening growth alongside rather depressed inflation pressures. The ECB had no room to wiggle with its easy monetary policy (negative rates) and we all were witnessing the Japanification of Europe.</p><p style=““ class=“text-align-justify“>German bond yields were in negative territory for the better part of the last decade and if not for the pandemic, any one person in the market would have laughed off the thought of yields rising back to 2008 levels. Yet, here we are today.</p><p style=““ class=“text-align-justify“>It’s one of those things that you should never say never in markets, or at least something along those lines.</p><p style=““ class=“text-align-justify“>Amid the holiday period, yields are continuing to climb as bonds are being sold again after the more hawkish ECB narrative earlier this month. A 50 bps rate hike for the central bank’s next meeting is also very much fully priced in – some 90% roughly.</p><p style=““ class=“text-align-justify“>It’s all about the inflation story now for European policymakers, they can somewhat be thankful that got a sort of reset button to distract from their shortcomings and failings since the global financial crisis.</p><p style=““ class=“text-align-justify“>But knowing how people never change, it is only a matter of time before the region succumbs to the same kind of blunders in the past and we’ll be talking about the same sort of incompetence once again.</p><p style=““ class=“text-align-justify“>For now, the inflation outlook will spare them the scrutiny but once the world starts to move to the next phase of the post-pandemic era, we’ll see who manages best. And if history is any indication as was the case after the global financial crisis, euro area lawmakers and policymakers don’t have the greatest of track records.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Domestic sight deposits CHF 506.4 bn vs CHF 510.2 bn prior</li></ul><p style=““ class=“text-align-justify“>There has been little change in overall sight deposits over the past two to three weeks, as the SNB takes it slow after its recent policy tweaking in the past few months as highlighted <a target=“_blank“ href=“https://www.forexlive.com/news/whats-behind-the-sudden-plunge-in-snb-sight-deposits-20221017/“ target=“_blank“ rel=“follow“>here</a> previously.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>Well, it’s not like the numbers matter anyway but if anything else, the end of China’s zero-Covid policy is very much a neat bookend to the whole pandemic over the past three years. The disease has been downgraded by China authorities from top-level Category A to Category B i.e. „only requiring necessary treatment and measures to curb the spread“.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>Starting from 8 January next year, China will reopen its borders and lift quarantine measures as they are set to label Covid as a disease that only requires „necessary treatment and measures to curb the spread“. That will officially put an end to their zero-Covid policy – which has been in place for roughly three years already now.</p><p style=““ class=“text-align-justify“>It’s a change in the times and how things progress will have significant implications globally. For now, the spread of infections will still somewhat limit China’s „openness“ but give it a few months, and we’re likely to see normalcy resume.</p><p style=““ class=“text-align-justify“>The biggest impact will likely come from the lifting of border restrictions, which is likely to see consumption activity increase drastically. We already saw how travel-deprived the rest of the world has been and upon the slow reopening over the past year-and-a-half, tourism has not died down whatsoever.</p><p style=““ class=“text-align-justify“>Now, China travellers will be the ones having to play catch up and that pent-up demand will also show up in other parts of the world.</p><p style=““ class=“text-align-justify“>It’s a boon for the global economy but it could also result in inflation pressures keeping that little bit higher, depending on how consumption activity rolls out in the months ahead.</p><p style=““ class=“text-align-justify“>The easing of supply disruptions has also been a welcome development and with China’s approach moving forward, we are not likely to see any major hiccups to supply chains and shipping as well – barring another major outbreak in key cities.</p><p style=““ class=“text-align-justify“>For markets, the most significant thing to watch out for is how does all this impact the inflation outlook for next year. It could be a subtle driver, but China demand could very well just add that little twist on how things are going to look like in 2023.</p>

This article was written by Justin Low at www.forexlive.com.

<p>This is a big policy change from China, a major step toward fully reopening travel with the rest of the world.</p><p>Currently, arriving passengers must quarantine for </p><ul><li>five days at a hotel</li><li>then followed by three days at home</li><li>down from a full 3 week quarantine period</li></ul><p>China’s National Health Commission announced on Monday that there would be no more quarantine requirement. </p><ul><li>people arriving in China will still need a negative virus test 48 hours before departure</li><li>passengers will be required to wear protective masks on board</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.

<p style=““ class=“text-align-justify“>I reckon the fact that the dot plots revealed that 17 of 19 Fed policymakers are seeing the Fed funds rate exceeding 5% by the end of next year (with no rate cuts projected) says a lot about how unanimous the thinking is at the central bank right now.</p><p style=““ class=“text-align-justify“>As such, even a rotation in FOMC voters for next year is very unlikely to shake things up – at least for the first half of the year, in all likelihood. But let’s still take a look at the who’s who in terms of voting members for this year and the change in the lineup for next year.</p><p style=““ class=“text-align-justify“>In 2022:</p><p style=““ class=“text-align-justify“>The rotating voters are Susan Collins (Boston), Loretta Mester (Cleveland), James Bullard (St. Louis), and Esther George (Kansas City). For next year:</p><p style=““ class=“text-align-justify“>The lineup of the rotating voters will consist of Patrick Harker (Philadelphia), Austan Goolsbee (Chicago), Lorie Logan (Dallas), and Neel Kashkari (Minneapolis).</p><p style=““ class=“text-align-justify“>Meanwhile, the permanent voters will remain the same in the form of Powell, Brainard, Barr, Cook, Jefferson, Waller, Bowman, and Williams (New York).</p><p style=““ class=“text-align-justify“>As much as I want to try and go off tangent to believe that the rotation will result in a meaningful shift in either a hawkish or dovish (one that most are perhaps saying), I don’t think we’ll see much in terms of dissent or stand out views from the Fed until the inflation outlook changes drastically.</p><p style=““ class=“text-align-justify“>In other words, don’t expect dissents to Powell’s leadership to come about too quickly and that will allow him to manage the Fed and market expectations much more easily for at least the first half of 2023.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>The holiday mood will continue after the Christmas break but that might not mean a pause in the action for stocks ahead of the new year. I’ve highlighted the technical predicament for the S&P 500 for a while now, ever since before we got to the Fed meeting earlier this month <a target=“_blank“ href=“https://www.forexlive.com/news/it-may-all-rest-on-wall-streets-shoulders-when-all-is-said-and-done-20221214/“ target=“_blank“ rel=“follow“>here</a>.</p><p style=““ class=“text-align-justify“>And that story is continuing to play out for now, with the double-top pattern near 4,100 and key trendline resistance (white line) for the year providing a strong set of technical consideration for sellers to take charge. That resulted in a break back below the 100-day moving average (red line) before the selloff was only halted by the 50.0 Fib retracement level of the recent swing move higher, seen at 3,796.</p><p style=““ class=“text-align-justify“>That is a key level to watch over the coming days, despite the fact that we are likely to observe thinner market conditions. Below that will be the measured target of the double-top pattern, seen at roughly 3,760, and then the November low at 3,698.</p><p style=““ class=“text-align-justify“>There might not have been a Santa Claus rally this year for stocks but I reckon investors are probably happy enough to not have been dealt another severe blow on the charts before Christmas.</p><p style=““ class=“text-align-justify“>But as we approach the turn of the year, things could get ugly if we do see a break of the key levels highlighted above.</p>

This article was written by Justin Low at www.forexlive.com.

<p>ICYMI,<a target=“_blank“ href=“https://www.forexlive.com/news/a-barrage-of-asian-market-holidays-incoming-next-week-fx-guide-20221223/“ target=“_blank“ rel=“follow“> I posted last week on the holidays in major FX centres in Asia this week</a>. The whole week is going to be more or less a holiday, but Monday and Tuesday will be officially closed in many centres:</p><p>Japan and China are officially open on Monday. BOJ Gov Kuroda is speaking:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/bank-of-japan-governor-kuroda-to-speak-monday-morning-japan-time-sunday-evening-us-time-20221225/“ target=“_blank“ rel=“follow“ data-article-link=“true“>Bank of Japan Governor Kuroda to speak Monday morning Japan time (Sunday evening US time)</a></li></ul><p>Once again, market liquidity will be very thin. If you are trading, take extra care.</p><p>I won’t be around today or tomorrow but will pop in from time to time. For Kuroda’s speech, for example (although afterwards rather than live coverage). Have a great break if you are taking one. </p>

This article was written by Eamonn Sheridan at www.forexlive.com.