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[Quick Facts]

1. Yen-short positions may have been liquidated considerably.

2. Biden impeachment inquiry set for House vote next week.

3. Russia may lose two-thirds of its gas export revenue in 2023.

4. Initial jobless claims edge up, signaling a cooling labor market.

[News Details]

Yen-short positions may have been liquidated considerably

Bank of Japan (BOJ) Deputy Governor Himino Ryozo said at a press conference yesterday that the exit from the negative interest rate policy will have a relatively small impact on the Japanese economy. The BOJ will carefully assess the situation and consider the timing and procedures for exiting from negative interest rates.

It has led to widespread speculation that the BOJ will raise interest rates, which are in negative territory now, in the first half of 2024. At one point in the day, overnight index swaps showed a nearly 45% probability of the BOJ ending its negative interest rate policy this month.

Daiwa Securities said the near-term low for the USDJPY could be near $141, given its rapid rebound to around 143. Yen-short positions may have been liquidated considerably due to market speculation that the Bank of Japan will adjust its policy ahead of schedule. However, with increased volatility, a second or third wave of yen appreciation is still possible.

With U.S. employment data due later in the day, the market is likely to react before the release of the data. Weak U.S. employment data could cause more selling of the U.S. dollar and send the USDJPY exchange rate to 141 again.

Biden impeachment inquiry set for House vote next week

U.S. House Republicans moved forward on Thursday to formally authorize an impeachment inquiry against Joe Biden for reasons related to his family's business dealings. Conservative Republicans have been pushing for an impeachment inquiry in recent months. The vote, which is expected to take place next week, will require all House members to publicly express support or opposition to the inquiry.

For the 18 Republicans and some other lawmakers from districts that Biden won in 2020, they may be reluctant to take such action. House Speaker Mike Johnson, however, said he believes a vote is necessary, in part to counter the notion that the ongoing investigation is legally improper. For this authorization vote to succeed, Johnson and his deputy can only afford a "defection" of up to three Republicans, while Democrats may vote unanimously against the resolution. Johnson said he believes the resolution will pass.

Russia may lose two-thirds of its gas export revenue in 2023

Gazprom's revenue from overseas gas sales may plunge more than 70% this year, resulting in budget proceeds from gas exports falling to $6.5 billion from $24 billion in 2022, Reuters calculations show. Europe used to be Russia's key source of revenue from gas sales. However, Moscow's gas exports to the region have significantly diminished due to the Russia-Ukraine conflict and following last year's blasts at Nord Stream undersea gas pipelines.

Gazprom's gas export revenue could fall to around $22 billion this year from a record $80 billion in 2022 when European spot prices soared to record high levels amid tight supplies, calculations show. The company's gas exports to regions outside the former Soviet Union will fall further from 100.9 billion cubic meters in 2022 to 68 billion cubic meters this year. Russia's Finance Ministry, however, expects budget revenues from gas exports to remain largely unchanged at around 567 billion rubles in 2024 and could increase to 620- 645 billion rubles in 2025-2026.

Initial jobless claims edge up, signaling a cooling labor market

The U.S. initial jobless claims came in at 220,000 for the week ended Dec. 2, compared to the expected 222,000 and the previous reading of 218,000. The U.S. continued jobless claims for the week of Nov. 25 were 1.861 million, compared with the expected 1.91 million and the previous 1.927 million. The four-week average initial jobless claims in the U.S. for the week of Dec. 2 rose to 220,750, compared with 220,000 in the previous week.

Initial jobless claims declined, but the overall trend remains upward. And, despite following a climb over the past two months, U.S. continued jobless claims saw their biggest drop during the holiday week since July, dropping by 64,000 to 1.86 million in the week of Nov. 25. It was the second decline since early September, after spiking in the previous week. This was largely thanks to the volatility of the data and U.S. bonds, especially during the holiday. The four-week average of continued jobless claims is at its highest level in two years, and the data erased some of the volatility.

Initial jobless claims are more volatile this time of year due to the holiday factor, making it difficult to get a clear signal on the job market. The report showed that there were 1.34 vacancies for every unemployed person in October, the lowest since August 2021.

Several job market reports released this week suggest that the labor market is cooling. There remains one last "big show" of non-farm payrolls to verify the market's speculation.

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