The cautious signal from the Bank of Japan ignited a wave of selling. Analysis of the short-term trends of spot gold, silver, crude oil and foreign exchange on December 22

Global market overview

1. European and American market conditions

The three major U.S. stock index futures all rose, with the Dow futures rising 0.01%, the S&P 500 futures rising 0.34%, and the Nasdaq futures rising 0.53%. Germany's DAX index fell by 0.01%, Britain's FTSE 100 index fell by 0.42%, France's CAC40 index fell by 0.33%, and Europe's Stoxx 50 index fell by 0.11%.

2. Interpretation of market news

The Bank of Japan’s cautious signal ignited a selling wave, the yen fell to a historical low, and the effectiveness of the intervention was doubtful

⑴ The Japanese yen exchange rate continued to fall on Monday, with the exchange rate against the euro close to a historical low, and the exchange rate against the Swiss franc hitting a record low, because the Bank of Japan Governor’s cautious stance after raising interest rates actually stimulated the market’s willingness to sell. ⑵ Although the Japanese authorities have issued warnings one after another, saying that they are paying close attention to "unilateral and violent" exchange rate fluctuations and are prepared to "take appropriate actions", they have not been able to effectively prevent the decline of the yen. ⑶ Factors driving recent yen weakness include: Japan’s new prime minister’s massive spending plan aimed at stimulating growth, which may exacerbate the country’s already tight fiscal situation. ⑷In terms of specific exchange rates, the euro against the yen hit a historical high of 184.92 yen, while the dollar against the yen hovered around 157.395 yen, close to last month's high. ⑸ The head of research at Mitsubishi UFJ pointed out that under the current risks and uncertainties, if the Japanese government fails to send a clear signal on properly managing fiscal policy risks, foreign exchange intervention is "extremely unlikely to succeed." ⑹ He warned that if the government cannot ease market concerns about finances, Japan willTreasury bonds could experience more selling, further destabilizing the yen and possibly even forcing the Finance Ministry to intervene. ⑺ In contrast, the euro and the pound performed strongly, with the euro rising 0.21% to 1.1738 against the U.S. dollar and the pound rising 0.46% to 1.344 against the U.S. dollar, mainly due to the European Central Bank keeping interest rates unchanged and not hinting at a recent interest rate cut, and the Bank of England signaling that the tightening cycle is nearing the end. ⑻The next focus of the market will be the speech that Bank of Japan Governor Kazuo Ueda will give on December 25, which may provide new policy clues.

The French government is expected to be unable to achieve its goal of controlling the fiscal deficit rate below 5% due to parliament's rejection of the 2026 budget proposal

www.xmtraders.commerzbank economist Vincent Starmer said that the government is urgently formulating a temporary financing plan that follows the 2025 framework. Even if all parties reach a www.xmtraders.compromise early next year, the deficit rate will still be difficult to drop below 5%. The Senate had previously rejected some of the tax increase provisions in the budget, supporting an alternative that would have kept the deficit at about 5.3%. Analysis points out that in the absence of electoral pressure, French politics will find it difficult to promote effective fiscal consolidation in the short term.

The Bank of Japan may raise interest rates to 1.5%

A former Bank of Japan official revealed that interest rates may be raised to 1.0% in June-July 2026, depending on the U.S. economy and domestic wage inflation data. Subsequent interest rate increases face political resistance - the neutral interest rate is close to 1.75% and may be criticized by the high-market Sanae camp. The current interest rate is 0.75%, a 30-year high, but the yen has weakened due to worries about Japan's fiscal policy.

The French 10-year government bond yield rose to 3.6%, a new high since November 2011

⑴ The French 10-year government bond yield climbed to 3.6%, continuing last week's rise and hitting the highest level since November 2011. ⑵ The European Central Bank's hawkish stance and concerns about France's public finances suppressed market sentiment. The European Central Bank last week kept interest rates unchanged for the fourth time in a row and suggested borrowing costs may remain at current levels for some time, while noting that the euro zone has withstood the impact of U.S. tariffs and performed better than expected. ⑶ At the same time, the Bank of France raised its GDP growth forecast, predicting growth of 0.9% in 2025 (previously 0.7%) and 1.0% in 2026 (previously 0.9%), while maintaining expectations of moderate inflation. ⑷ At the fiscal level, lawmakers failed to approve the 2026 budget at a joint www.xmtraders.committee meeting on Friday, forcing the government to seek emergency legislation to extend the 2025 budget. Prime Minister Sebastian Le Corni expressed regret that parliament would not be able to vote on the budget before December 31.

The yield on Italian 10-year government bonds rose to 3.56% due to the hawkish stance of the European Central Bank and budget concerns

⑴The yield on Italian 10-year government bonds climbed to 3.56%, continuing last week's gains and hitting the highest level since early October. ⑵ The European Central Bank previously decided to maintain monetary policy unchanged and hinted that at least in the futureFurther rate cuts are unlikely for a year. Last week, the European Central Bank kept interest rates unchanged for the fourth consecutive time, while noting that the euro zone had withstood the impact of U.S. tariffs and performed better than expected. ⑶ Stronger-than-expected economic data also prompted the central bank to once again raise its growth forecast, predicting that the euro zone's GDP will grow by 1.4% in 2025 (previously 1.2%), and predict that overall inflation will remain near the 2% target until 2028. ⑷At the fiscal level, the European Central Bank warned that Italy's 2026 budget measures may affect bank liquidity, loan conditions and investor confidence, thereby increasing the country's borrowing cost pressure.

Inflation expectations are slightly lower but interest rate estimates are raised, and Brazil's economic outlook highlights policy dilemmas

⑴ According to the latest survey by the Brazilian Central Bank, economists have slightly lowered their forecast for the country's annual IPCA inflation rate in 2025 to 4.33%, from the previous expectation of 4.36%. ⑵ The inflation rate forecast for 2026 has also been lowered to 4.06%, lower than the previously expected 4.10%. ⑶ Although inflation expectations have eased, the estimate of the benchmark interest rate at the end of 2026 has been raised from 12.13% to 12.25%, indicating that the market expects the pace of monetary policy easing to be more cautious. ⑷In terms of economic growth, the forecast for GDP growth in 2025 was slightly raised to 2.26%, while the forecast for 2026 remained unchanged at 1.80%. ⑸In terms of exchange rate expectations, economists expect the Brazilian real to be 5.43 against the U.S. dollar at the end of 2025, a slight depreciation from the previously estimated 5.40. ⑹ The exchange rate expectation for the end of 2026 remains unchanged at the level of 5.50. ⑺These adjustments reflect that although inflationary pressures have eased slightly, Brazil still needs to maintain higher real interest rates to consolidate price stability, which may inhibit economic growth prospects to a certain extent.

The U.S. debt curve is steepening in a bear market, and the global bond market sell-off resonates

⑴The U.S. Treasury market showed a mild bear market steepening trend on Monday, that is, the long-end yield rose more than the short-end, and the curve steepened. ⑵ Specifically, the 2-year yield is trading in the range of 3.494% to 3.486%, the 10-year yield is trading in the range of 4.171% to 4.153%, and the spread between the two (2s/10s) fluctuates between 67.6 and 64.6 basis points. ⑶ The steepening of the long-term curve is more obvious, and the spread between 5-year and 30-year interest rates (5s/30s) fluctuates between 114.1 and 112.7 basis points. ⑷ This round of selling pressure on U.S. debt is partly due to external market transmission. The continued rise in yields on Japanese government bonds and German government bonds has put additional pressure on U.S. debt. ⑸ News highlights that the market paid attention to overnight include: Cleveland Fed President Hammack remains vigilant about inflation and prefers to keep interest rates unchanged until spring; analysis points out that the job market has cooled this year, with unemployment rising and wage growth slowing; the market continues to worry that rising public debt may trigger a financial crisis and political instability. ⑹ News related to the Bank of Japan also affects the market. A former policy member predicted that the central bank will increase the number of policies during the term of Governor Kazuo Ueda.interest rate to 1.5%, while the weakening trend of the yen is challenging the limits of the authorities' tolerance. ⑺ The U.S. Treasury Department will conduct a series of bond auctions that day, including US$86 billion in 13-week Treasury bills, US$77 billion in 26-week Treasury bonds, and US$69 billion in 2-year Treasury bonds. The demand will test the market's willingness to accept the current yield level.

Weak growth but "leading" the G7, the British economy is in "relative trouble"

⑴ Analysts pointed out that the latest revised economic growth data in the UK depicts an economy struggling to move forward in troubled times and facing huge challenges. ⑵The Bank of England expects economic growth to stagnate in the final months of 2025, mainly constrained by budget uncertainty. ⑶ Specific data shows that the UK’s economic growth rate in the second quarter was revised down from 0.3% to 0.2%, while the growth rate in the third quarter remained unchanged at 0.1%. ⑷ However, this performance needs to be viewed in a global context: despite the downward revision of growth in the second quarter, the British economy's performance in the first half of the year was still tied for first among the G7. ⑸ There are currently some positive signs. As interest rates fall, the British household savings rate has declined. This may indicate that household consumption willingness is increasing and is expected to provide certain support for the economy.

The interest rate return opportunity appears, and France’s 10-year treasury bonds are undervalued relative to Italy

⑴ After directional adjustments to the interest rate spread between the two countries, France’s 10-year treasury bonds appear “cheap” relative to Italy’s treasury bonds of the same period. ⑵ According to the regression analysis of the three-month fixed-maturity yield, the yield of French 10-year government bonds is approximately 5.1 basis points higher than the beta-adjusted Italian 10-year government bond yield. ⑶ This spread has reached 2.2 standard deviations, indicating that the current spread level of French-Italian 10-year government bonds has statistically significantly deviated from the norm, which may indicate the existence of trading opportunities for spreads to return to the mean.

The German financial regulator took action and fined online banks 560,000 euros

⑴ The German Federal Financial Supervisory Authority announced that it had imposed two fines totaling 560,000 euros on Flatex Degiro Bank AG. ⑵ The regulatory agency pointed out that the www.xmtraders.company’s violations involved violations of relevant obligations under the German Securities Exchange Act. ⑶The specific violation fact is that the www.xmtraders.company promoted free securities services on its website, but did not clearly indicate that it would charge a processing fee.

USD 3.2 billion enters the Gulf of Mexico, energy mergers and acquisitions cause market divergence

⑴ British North Sea oil and gas www.xmtraders.company HarbourEnergy announced on Monday that it will acquire deepwater oil and gas exploration and production www.xmtraders.company LLOG Exploration for US$3.2 billion, marking its official entry into the Gulf of Mexico market. ⑵The acquisition consideration includes US$2.7 billion in cash and US$500 million in Harbor voting www.xmtraders.common shares. The cash portion will be provided through a US$1 billion bridge loan, a US$1 billion term loan and existing liquidity. ⑶The www.xmtraders.company expects the acquisition to help its total production reach approximately 500,000 per day by the end of this decadebarrels of oil equivalent and increasing free cash flow from 2027 onwards. ⑷ However, the market reacted negatively to the transaction, with the www.xmtraders.company's stock price falling 6.4% that day. Analysts believe that this reflects investors' concerns that the transaction may put pressure on the www.xmtraders.company's balance sheet. ⑸ As of September 30 this year, Harbor's net debt was US$4.2 billion, and this acquisition will further increase its financial leverage. ⑹ After the transaction is www.xmtraders.completed, LLOG's parent www.xmtraders.company, LLOG Holdings LLC, will hold 11% of Harbor's listed voting ordinary shares, and the shareholding ratio of existing shareholders will be diluted to 89%. ⑺The Gulf of Mexico continues to attract international energy giants including BP, Shell, and Chevron because of its huge deepwater reserves, www.xmtraders.complete infrastructure, and long-term production potential. ⑻The energy policies promoted by the Trump administration tend to encourage oil and gas exploration rather than investment in renewable energy, which has also enhanced the attractiveness of the region to energy www.xmtraders.companies. ⑼ LLOG itself is one of the winners of the U.S. government’s first sale of oil and gas drilling rights in the Gulf of Mexico since 2023, which adds policy-level certainty to its assets.

3. Trends of major currency pairs before the New York market opens

EUR/USD: As of 21:20 Beijing time, EUR/USD rose and is now at 1.1747, an increase of 0.31%. Prices (EUR/USD) soared on the final trading day before the New York session, taking advantage of the minor bullish trendline supporting its short-term trajectory to move back above the EMA50, regaining a key technical point that reinforces the stability of the bullish trend and provides the momentum needed in the face of any negative pressure.

GBP/USD: As of 21:20 Beijing time, GBP/USD has risen and is now at 1.3438, an increase of 0.45%. Before the New York session, GBPUSD rose in the last trading session as it relied on support from the EMA50 to gain bullish momentum that helped realize these gains. The main bullish trend prevailed and it traded along the support trend line of this track, except for the relative strength indicator which showed positive signals despite reaching overbought levels.

Spot gold: As of 21:20 Beijing time, spot gold has risen and is currently trading at 4420.39, an increase of 1.89%. Prices (gold) strengthened their gains in the last intraday session in New York, breaking through the key historical resistance of $4,380 to reach new all-time highs. This stunning performance was fully supported by the primary bullish trend in the short term. Along with the continued trading of secondary bullish trend lines supporting this bullish trajectory, indicating that the purchasing power of the precious metal continues to exist, in addition, the relative strength indicator also showed positive signals despite reaching overbought levels.

Spot silver: As of 21:20 Beijing time, spot silver rose, now trading at 68.924, an increase of 2.68%. In the New York pre-market, (silver) prices reached all-time highs in the last trading day, the main bullish trend prevailed and in addition to the continuation of the dynamic pressure represented by the exchange above the EMA50, it also traded along the support trend line. On the other hand, we noticed the appearance of a negative overlapping signal on the relative strength indicator after reaching overbought levels, which reduced the last gains.

Crude oil market: As of 21:20 Beijing time, U.S. oil rose, now trading at 57.790, an increase of 2.26%. Before the New York market opened, in recent intraday trading, (crude oil) prices continued to rise, preparing to hit the key resistance level of $57.35, which has been regarded as a potential target in our previous analysis. Price continues to trade above the 50-day exponential moving average (EMA50) and was influenced by the previous short-term breakout of a minor bearish trendline. Additionally, there are positive signals on the Relative Strength Index, despite reaching overbought levels.

4. Institutional view

Capital Economics: The UK's growth structure improved in the third quarter but the slowdown trend in the second half of the year has not changed

⑴ Alex Kerr, an economist at Capital Economics, pointed out that although data showed that UK GDP only increased by 0.1% month-on-month in the third quarter, the economic situation seemed slightly healthier than previously expected.

⑵Business investment data was significantly revised upward, from a 0.3% month-on-month decrease originally announced to an increase of 1.5%; at the same time, despite the decline in actual household income, consumers' willingness to spend has become stronger.

⑶ The growth rate of household consumption expenditure was also revised upward, and the household savings rate dropped from 10.2% in the second quarter to 9.5% in the third quarter, the lowest level in more than a year.

(4) However, the above data are lagging indicators and have not changed the overall picture of GDP growth slowing down in the second half of 2025. The UK economy has grown in just two of the past seven months.

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