<Today's Opening Must-Knows_12/17 Bloomberg>
1) Won Remains Unstable Despite Impeachment Vote Passage; Hope Seen in Options Market
The dollar-won exchange rate continues to show volatility ahead of year-end and major country monetary policy decisions. With continued selling by foreigners in the KOSPI stock market, expectations for an interest rate cut by the Bank of Korea early next year are gaining momentum, making won recovery somewhat sluggish. However, in the options market, put option trading overwhelmingly dominated call option trading on Monday, suggesting that the market believes further weakness of the won will be limited going forward. It is expected that foreign exchange authorities will not continue to tolerate further weakening of the won.
2) Canadian Finance Minister Resigns Abruptly Over Disagreement with Trump Administration
Canadian Finance Minister Chrystia Freeland abruptly resigned after clashing with Prime Minister Justin Trudeau over how to respond to the Trump administration. Freeland announced her surprise resignation on social media hours before a scheduled report on financial and economic conditions in Parliament. In a letter to the prime minister, she stated that "there is no agreement on the best path forward for Canada." As a result, the Canadian dollar fell 0.3% against the US dollar, and the yield on two-year Canadian government bonds rose more than 4 basis points to 3.06%.
3) French Central Bank Lowers Growth Forecast; Moody's Downgrades Rating
The Banque de France lowered its economic growth forecast due to the expected impact of political turmoil on household and business sentiment. The GDP growth forecast for next year was revised down from 1.2% in September to 0.9%, and the 2026 forecast was also lowered by 0.2 percentage points to 1.3%. Moody's downgraded France's sovereign credit rating from Aa2 to Aa3 earlier last week due to concerns about weakening fiscal health. Banque de France Governor François Villeroy de Galhau warned that "if budget proposals continue to be rejected due to political divisions, there is a risk of gradual economic collapse and the disintegration of Europe."
4) Germany to Hold Early General Election in February
Germany's parliament voted no confidence in Chancellor Olaf Scholz, paving the way for an early general election. As a result of this vote, the general election scheduled for September next year is expected to be moved forward to February 23rd. The next chancellor will need to secure public support and large-scale investment funds needed to improve infrastructure before its collapse, strengthen defense capabilities, and transition to a technology-driven and environmentally friendly economy. Economic recovery along with government finances and immigration issues are expected to be key issues in this election.
5) JP Morgan Expects Increased FX Trading Activity During Trump Era
Stephen Jefferies of JP Morgan expects President-elect Trump's trade policies to increase attention on the FX market and boost trading volume. Jefferies noted that trading volumes handled by his team have increased since the US election, stating that "when discussing changes in global trade dynamics, FX is definitely one of the key pressure points." Trump's tax cuts and tariff pledges are likely to continue driving market trends next year, potentially influencing interest rate paths as well.
(Source: Bloomberg News)
