Tag: Japan

  • Cautious Trade Dominates as Dollar Holds Steady, Yen Leads, Gold Jumps

    Cautious Trade Dominates as Dollar Holds Steady, Yen Leads, Gold Jumps


    Activity in the forex markets has turned relatively subdued today, with no clear trend emerging as traders shift into a cautious stance. With no top-tier economic data scheduled for the rest of the week, attention is turning to the impending inauguration of US President-elect Donald Trump next Monday. The spotlight is squarely on his anticipated tariff policies, which could have profound implications for global trade and economic stability.

    Yen holds its position as the strongest currency of the day, buoyed by increasing speculation of a potential rate hike from the Bank of Japan at its meeting next week. BoJ Governor Kazuo Ueda’s consistent messaging has reinforced market expectations, with traders pricing in a higher likelihood of policy tightening.

    Swiss Franc ranks second best, benefiting from decline in European benchmark yields. Dollar is the third-best performer, continuing to consolidate against its peers. The greenback’s movements were unaffected by slightly worse-than-expected US jobless claims and retail sales data.

    On the downside, New Zealand Dollar has overtaken Sterling as the weakest currency of the day. Pound remains under pressure following disappointing GDP data but has not faced aggressive selling. Meanwhile, Australian Dollar is the third weakest, while Euro and Canadian Dollar trade in mixed fashion.

    Technically, Gold’s rally this week suggests that choppy rebound from 2536.67 is actually still in progress. Further rise is now in favor through 2725.95 resistance in the near term. However, this rise is seen as the second leg of the corrective pattern from 2789.92. Hence, upside should be below this high. Break of 55 D EMA (now at 2643.87) will argue that the third leg has started to 2536.67 support and below.

    US initial jobless claims falls to 217k vs exp 210k

    US initial jobless claims rose 14k to 217k in the week ending January 11, above expectation of 210k. Four-week moving average of initial claims fell -750 to 213k.

    Continuing claims fell -18k to 1859k in the week ending January 4. Four-week moving average of continuing claims fell -1k to 1867k.

    US retail sales rise 0.4% mom in Dec, ex-auto sales up 0.4% mom

    US retail sales rose 0.4% mom to USD 729.2B in December, below expectation of 0.5% mom. Ex-auto sales rose 0.4% mom to USD 586.3B, below expectation of 0.5% mom. Ex-gasoline sales rose 0.4% mom to USD 676.8B. Ex-auto & gasoline sales rose 0.4% mom to USD 533.9B.

    Total sales for the October through December period were up 3.7% from the same period a year ago.

    ECB Minutes: Gradual easing essential to monitor disinflation check points

    ECB’s December 11–12 meeting minutes noted that while the 25 bps rate cut decided at the meeting was widely supported, some members argued for a more aggressive 50 bps reduction.

    Some policymakers contended that a larger rate cut would have better addressed Eurozone’s weakening economic projections, with one noting that “successive projection exercises have shown increasing downside risks to growth.”

    However, the majority concurred that a smaller, measured cut aligned with the “controlled pace of easing” and provided a “sense of the direction” of the path of interest rates.

    The minutes emphasize while projections were conditional on a further rate cut in January, the meeting underscored that “data dependency precluded any foregone conclusions.”

    The minutes also stated that the “measured pace of interest rate cuts” was essential to ensure that ECB could “pass critical checkpoints to verify disinflation remains on track.” Furthermore, it was highlighted that optionality must be preserved to address risks that could derail inflation stabilization, including geopolitical tensions, global trade disruptions, and energy price volatility.

    Nevertheless, “if the baseline projection for inflation is confirmed over the next few months and quarters,” the minutes noted, a “gradual dialing back of policy restrictiveness” would be appropriate.

    Eurozone goods exports fall -1.6% yoy in Nov, imports down -1.0% yoy

    Eurozone goods exports fell -1.6% yoy to EUR 248.3B in November. Good imports fell -1.0% yoy to EUR 231.9B. Trade balanced showed a EUR 16.4B surplus. Intra-Eurozone trade fell -7.0% yoy to EUR 214.8B.

    In seasonally adjusted term, goods exports rose 3.2% mom to EUR 240.6B.Goods imports rose 0.7% mom to EUR 227.8B. Trade balance widened from October’s EUR 7.0B to EUR 12.9B, larger than expectation of EUR 7.2B. Intra-Eurozone trade fell -1.7% mom to EUR 210.4B.

    UK GDP grows only 0.1% mom in Nov, with mixed sector performance

    UK’s economy posted modest growth in November, with GDP increasing by 0.1% mom, but slightly missing market expectations of 0.2%. Nevertheless, this marked a positive turnaround from the -0.1% mom contraction in October.

    Sectoral performance was mixed, with services, the largest contributor to the economy, inching up by 0.1% mom, while production fell by -0.4% mom. Construction activity, however, provided a brighter spot, rising 0.4% mom during the month.

    Despite November’s modest gains, the broader economic picture remains subdued. Over the three months to November 2024, real GDP showed no growth compared to the three months to August. Services, which account for a significant portion of the UK’s output, stagnated over this period. Production output contracted by -0.7%, offsetting the 0.2% growth seen in construction.

    BoJ’s Ueda reiterates rate hike debate for next week’s policy meeting

    BoJ Governor Kazuo Ueda indicated today, for the second time this week, that the central bank will “debate whether to raise interest rates” at its upcoming January 23-24 policy meeting. This marks the second time in this week that Ueda has emphasized

    Ueda’s comments come as BoJ prepares its new quarterly economic report, which will serve as the basis for its policy decision. While the Governor has not committed to a specific outcome, the repeated message signals that a rate hike is a plausible scenario, barring any significant market shocks tied to the January 20 inauguration of U.S. President-elect Donald Trump.

    Market sentiment, nevertheless, remains divided on the timing of the anticipated hike. A recent poll conducted between January 8-15 shows that 59 out of 61 economists expect BoJ to raise rates to 0.50% by the end of March. Yet, only 20 foresee the move occurring at this month’s meeting.

    Japan’s PPI holds steady at 3.8% as import prices turn positive

    Japan’s PPI held steady at 3.8% yoy in December, meeting market expectations and maintaining the previous month’s pace. Key drivers included a sharp 31.8% yoy rise in agricultural goods prices, fueled by soaring rice costs.

    Energy costs also contributed significantly, with electric power, gas, and water prices climbing 12.9% year-on-year. This uptick comes as the government phases out subsidies designed to mitigate rising utility and gasoline prices.

    Yen-based import prices turned positive, rising 1.0% yoy after three months of declines. While modest, this reversal underscores the lingering effects of Yen depreciation, which was recorded at -0.1% mom.

    Australia’s employment grows 56.3k in Dec, showing continuous resilience

    Australia’s labor market displayed resilience in December as employment surged by 56.3k, significantly exceeding expectations of a 15.0k increase. Number of unemployed people also rose by 10.3k, contributing to a slight uptick in the unemployment rate from 3.9% to 4.0%, in line with forecasts.

    Participation rate climbed to a record high of 67.1%, up from 67.0%, reflecting an expanding labor force. Additionally, employment-to-population ratio rose by 0.1 percentage point to a new peak of 64.5%, showcasing the labor market’s capacity to absorb more workers. Monthly hours worked increased by 0.5% mom, equivalent to 10 million additional hours.

    This data supports the view that the labor market’s earlier signs of easing have stabilized in the second half of 2024. Robust employment growth, consistent levels of average hours worked, and unchanged or lower levels of labor underutilization compared to a year ago affirm the ongoing strength of the job market.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0248; (P) 1.0302; (R1) 1.0344; More…

    EUR/USD is still engaged in consolidations above 1.0176 and intraday bias stays neutral. With 1.0435 resistance intact, outlook remains bearish and further decline is expected. On the downside, break of 1.0176 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. However, considering bullish convergence condition in 4H MACD, firm break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Dec 3.80% 3.80% 3.70% 3.80%
    00:00 AUD Consumer Inflation Expectations Jan 4.00% 4.20%
    00:01 GBP RICS Housing Price Balance Dec 28% 28% 25%
    00:30 AUD Employment Change Dec 56.3K 15.0K 35.6K 28.2K
    00:30 AUD Unemployment Rate Dec 4.00% 4.00% 3.90%
    07:00 EUR Germany CPI M/M Dec F 0.50% 0.40% 0.40%
    07:00 EUR Germany CPI Y/Y Dec F 2.60% 2.60% 2.60%
    07:00 GBP GDP M/M Nov 0.10% 0.20% -0.10%
    07:00 GBP Industrial Production M/M Nov -0.40% 0.10% -0.60%
    07:00 GBP Industrial Production Y/Y Nov -1.80% -1.00% -0.70%
    07:00 GBP Manufacturing Production M/M Nov -0.30% 0.20% -0.60%
    07:00 GBP Manufacturing Production Y/Y Nov -1.20% -0.30% 0.00%
    07:00 GBP Goods Trade Balance (GBP) Nov -19.3B -18.0B -19.0B -19.3B
    10:00 EUR Eurozone Trade Balance (EUR) Nov 12.9B 7.2B 6.1B 7.0B
    12:30 EUR ECB Meeting Accounts
    13:15 CAD Housing Starts Y/Y Dec 231K 250K 262K 267K
    13:30 USD Initial Jobless Claims (Jan 10) 217K 210K 201K 203K
    13:30 USD Retail Sales M/M Dec 0.40% 0.50% 0.70% 0.80%
    13:30 USD Retail Sales ex Autos M/M Dec 0.40% 0.50% 0.20%
    13:30 USD Import Price Index M/M Dec 0.10% -0.10% 0.10%
    13:30 USD Philadelphia Fed Manufacturing Jan 44.3 -8.5 -16.4
    15:00 USD NAHB Housing Market Index Jan 47 46
    15:00 USD Business Inventories Nov 0.10% 0.10%
    15:30 USD Natural Gas Storage -260B -40B

     



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  • BoJ’s Repeated Hawkish Signals Fuel Yen Rebound, Sterling Falters on Stagnant Growth Data

    BoJ’s Repeated Hawkish Signals Fuel Yen Rebound, Sterling Falters on Stagnant Growth Data


    Yen’s near term rebound gained momentum again today, supported by BOJ Governor Kazuo Ueda’s persistent messaging about a potential rate hike at next week’s policy meeting. Ueda’s repeated remarks are interpreted as laying the groundwork for markets to brace for a monetary policy shift. While recent polls as of last week indicated only a minority expectation of a January hike, the market are clearly undergoing recalibration. However, the current move in Yen against Dollar remains largely corrective, and a sustained reversal in the broader down trend trend would require further confirmation.

    Meanwhile, Sterling continues to face mounting pressure after UK GDP data highlighted stagnation in economic activity. Monthly GDP rose just 0.1% in November, falling short of expectations. More importantly, growth over the three months to November was flat. The data has heightened fears of a contraction in Q4. Adding to Sterling’s challenges, new MPC member Alan Taylor struck a dovish tone in his first public speech, noting that while inflation is nearing its endgame, the weakening economy justifies a return to more “normal” interest rates.

    For the week so far, Sterling remains the weakest performer among major currencies, with no signs of a sustainable rebound. Dollar is the second worst, as it continues to consolidate recent gains. . Yesterday’s softer-than-expected core CPI reading alleviated fears of a Fed policy reversal toward tightening, while a resurgence in risk appetite has kept the Dollar’s recovery momentum in check. Canadian Dollar rounds out the bottom three.

    On the other hand, Australian Dollar, buoyed by risk-on sentiment. However, the Aussie’s inability to extend its rally following robust employment data raises questions about its underlying strength. Yen is the second-best performer, with the potential to advance further as expectations for a BoJ policy shift solidify. New Zealand Dollar rounds out the top three, while Euro and Swiss Franc are mixed in the middle.

    Technically, the US stock markets are back into focus with yesterday’s strong rebound. It might be too early to call for resumption of record run in S&P 500. But price actions from 6099.97 are still clearly corrective looking. Downside is also supported above 5669.67 resistance turned support. So, break of 6099.97 remains in favor at a later stage, probably after Trump’s inauguration that clear out some uncertainties over his trade policies, as tariff could be raised just gradually to minimize the shocks to the economy.

    UK GDP grows only 0.1% mom in Nov, with mixed sector performance

    UK’s economy posted modest growth in November, with GDP increasing by 0.1% mom, but slightly missing market expectations of 0.2%. Nevertheless, this marked a positive turnaround from the -0.1% mom contraction in October.

    Sectoral performance was mixed, with services, the largest contributor to the economy, inching up by 0.1% mom, while production fell by -0.4% mom. Construction activity, however, provided a brighter spot, rising 0.4% mom during the month.

    Despite November’s modest gains, the broader economic picture remains subdued. Over the three months to November 2024, real GDP showed no growth compared to the three months to August. Services, which account for a significant portion of the UK’s output, stagnated over this period. Production output contracted by -0.7%, offsetting the 0.2% growth seen in construction.

    BoJ’s Ueda reiterates rate hike debate for next week’s policy meeting

    BoJ Governor Kazuo Ueda indicated today, for the second time this week, that the central bank will “debate whether to raise interest rates” at its upcoming January 23-24 policy meeting. This marks the second time in this week that Ueda has emphasized

    Ueda’s comments come as BoJ prepares its new quarterly economic report, which will serve as the basis for its policy decision. While the Governor has not committed to a specific outcome, the repeated message signals that a rate hike is a plausible scenario, barring any significant market shocks tied to the January 20 inauguration of U.S. President-elect Donald Trump.

    Market sentiment, nevertheless, remains divided on the timing of the anticipated hike. A recent poll conducted between January 8-15 shows that 59 out of 61 economists expect BoJ to raise rates to 0.50% by the end of March. Yet, only 20 foresee the move occurring at this month’s meeting.

    Japan’s PPI holds steady at 3.8% as import prices turn positive

    Japan’s PPI held steady at 3.8% yoy in December, meeting market expectations and maintaining the previous month’s pace. Key drivers included a sharp 31.8% yoy rise in agricultural goods prices, fueled by soaring rice costs.

    Energy costs also contributed significantly, with electric power, gas, and water prices climbing 12.9% year-on-year. This uptick comes as the government phases out subsidies designed to mitigate rising utility and gasoline prices.

    Yen-based import prices turned positive, rising 1.0% yoy after three months of declines. While modest, this reversal underscores the lingering effects of Yen depreciation, which was recorded at -0.1% mom.

    Australia’s employment grows 56.3k in Dec, showing continuous resilience

    Australia’s labor market displayed resilience in December as employment surged by 56.3k, significantly exceeding expectations of a 15.0k increase. Number of unemployed people also rose by 10.3k, contributing to a slight uptick in the unemployment rate from 3.9% to 4.0%, in line with forecasts.

    Participation rate climbed to a record high of 67.1%, up from 67.0%, reflecting an expanding labor force. Additionally, employment-to-population ratio rose by 0.1 percentage point to a new peak of 64.5%, showcasing the labor market’s capacity to absorb more workers. Monthly hours worked increased by 0.5% mom, equivalent to 10 million additional hours.

    This data supports the view that the labor market’s earlier signs of easing have stabilized in the second half of 2024. Robust employment growth, consistent levels of average hours worked, and unchanged or lower levels of labor underutilization compared to a year ago affirm the ongoing strength of the job market.

    GBP/JPY Daily Outlook

    Daily Pivots: (S1) 190.78; (P) 191.91; (R1) 192.72; More…

    GBP/JPY’s breach of 190.06 temporary low suggests that fall from 198.94 is resuming. Intraday bias is back on the downside for 188.07 support. Firm break there will argue that corrective pattern from 180.00 has finished too, and larger decline from 208.09 might be ready to resume. On the upside, above 193.01 resistance will delay the bearish case and turn intraday bias neutral again.

    In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Dec 3.80% 3.80% 3.70% 3.80%
    00:00 AUD Consumer Inflation Expectations Jan 4.00% 4.20%
    00:01 GBP RICS Housing Price Balance Dec 28% 28% 25%
    00:30 AUD Employment Change Dec 56.3K 15.0K 35.6K 28.2K
    00:30 AUD Unemployment Rate Dec 4.00% 4.00% 3.90%
    07:00 EUR Germany CPI M/M Dec F 0.50% 0.40% 0.40%
    07:00 EUR Germany CPI Y/Y Dec F 2.60% 2.60% 2.60%
    07:00 GBP GDP M/M Nov 0.10% 0.20% -0.10%
    07:00 GBP Industrial Production M/M Nov -0.40% 0.10% -0.60%
    07:00 GBP Industrial Production Y/Y Nov -1.80% -1.00% -0.70%
    07:00 GBP Manufacturing Production M/M Nov -0.30% 0.20% -0.60%
    07:00 GBP Manufacturing Production Y/Y Nov -1.20% -0.30% 0.00%
    07:00 GBP Goods Trade Balance (GBP) Nov -19.3B -18.0B -19.0B -19.3B
    10:00 EUR Eurozone Trade Balance (EUR) Nov 7.2B 6.1B
    12:30 EUR ECB Meeting Accounts
    13:15 CAD Housing Starts Y/Y Dec 250K 262K
    13:30 USD Initial Jobless Claims (Jan 10) 210K 201K
    13:30 USD Retail Sales M/M Dec 0.50% 0.70%
    13:30 USD Retail Sales ex Autos M/M Dec 0.50% 0.20%
    13:30 USD Import Price Index M/M Dec -0.10% 0.10%
    13:30 USD Philadelphia Fed Manufacturing Jan -8.5 -16.4
    15:00 USD NAHB Housing Market Index Jan 47 46
    15:00 USD Business Inventories Nov 0.10% 0.10%
    15:30 USD Natural Gas Storage -260B -40B

     



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  • Dollar Weakens on Core Inflation Relief, But Bullish Bias Holds

    Dollar Weakens on Core Inflation Relief, But Bullish Bias Holds


    Dollar extended its near-term pullback in early trading after core inflation data for December came in slightly below expectations, offering a degree of relief to traders and investors. Treasury yields also retreated, with the 10-year yield falling back below the 4.7% mark.

    Core CPI rose by 3.2% yoy, down from 3.3%, a result that eased fears of renewed inflationary pressures forcing Fed’s hand back into tightening. While core inflation remains clearly elevated, the data at least suggests that pressures are not intensifying enough to alter Fed’s loosening bias, with pauses in between moves.

    Fed fund futures now show 97.3% chance of a hold at the January FOMC meeting, a decision that appears still firmly priced in. Meanwhile, the odds of a rate cut in May have rebounded to 49%, up from 36% the previous day. June remains the most likely timing for a rate cut, with markets assigning nearly 70% probability. This aligns with expectations that Fed might deliver only one rate reduction in 2025.

    In forex markets, Dollar is the worst performer of the day so far. Canadian Dollar and Swiss Franc also rank among the weaker currencies. On the other hand, Japanese Yen is leading gains, bolstered by comments from BoJ officials that have reintroduced the possibility of a rate hike at the January meeting. Australian Dollar and New Zealand Dollar also posted solid gains, supported by improved risk sentiment. Euro and Sterling are trading with mixed momentum in middle positions.

    From a technical perspective, while the Dollar’s pullback has extended, it remains above key support levels against major counterparts. EUR/USD is capped below 1.0435 resistance, GBP/USD below 1.2486, AUD/USD below 0.6301, and USD/CHF above 0.9007 support. As long as these levels hold, the Dollar’s broader bullish trend remains intact, and the current movement is viewed as a consolidation phase rather than a reversal.

    US CPI jumps to 2.9% in Dec, core ticks down to 3.2%

    US CPI rose by 0.4% mom in December, surpassing expectations of 0.3% mom and marking an acceleration from the prior month’s 0.3% mom increase. Meanwhile, core CPI, which excludes the more volatile food and energy components, rose by a more subdued 0.2% mom, in line with market expectations but down from the 0.3% mom recorded in November.

    Energy prices were the primary driver, rising 2.6% mom on the month and accounting for over 40% of the headline increase. Food prices also contributed to inflationary pressure, advancing by 0.3% mom.

    On an annual basis, headline inflation climbed to 2.9% yoy, meeting consensus forecasts and up from November’s 2.7% yoy. Core inflation, however, slowed to 3.2% yoy, slightly below expectations of 3.3% yoy, indicating some easing in underlying price pressures. Notably, energy prices declined by -0.5% yoy, while food prices remained elevated at 2.5% yoy.

    Eurozone industrial production rises 0.2% mom in Nov, EU up 0.1% mom

    Eurozone industrial production edged up by 0.2% mom in November, falling short of 0.3% mom consensus forecast. While the overall increase suggests resilience in the industrial sector, the performance was uneven across categories. Production rose by 1.5% for durable consumer goods and 1.1% for energy, highlighting strong demand in these areas. Intermediate and capital goods also posted gains of 0.5% each, while non-durable consumer goods saw a marginal uptick of 0.1%.

    Across the broader EU, industrial production grew by just 0.1% on the month. The highest monthly increases were recorded in Belgium (+8.7%), Malta (+7.1%) and Lithuania (+4.3%). The largest decreases were observed in Ireland (-5.8%), Luxembourg (-3.9%) and Portugal (-3.4%).

    ECB’s Guindos and Villeroy affirm progress on disinflation

    ECB Vice President Luis de Guindos highlighted today that disinflation in the Eurozone is “well on track,” reinforcing optimism about the region’s progress toward price stability. While December’s inflation rose to 2.4%, Guindos noted that this increase was anticipated and aligned with ECB’s projections. Domestic inflation remains elevated, but recent easing signals have provided some relief.

    Guindos cautioned, however, that risks remain high. “The high level of uncertainty calls for prudence,” he said, referencing global trade frictions that could fragment the global economy further. He also warned about the fiscal policy challenges to weigh on borrowing costs and renewed geopolitical tensions to destabilize energy markets.

    Despite weak near-term economic outlook, Guindos expressed cautious optimism, stating, “The conditions are in place for growth to strengthen over the projection horizon, although less than was forecast in previous rounds.”

    Meanwhile, French ECB Governing Council member François Villeroy de Galhau echoed a positive sentiment, emphasizing progress against inflation.

    “We have practically won the battle against inflation,” he said, projecting that it “makes sense for interest rates to reach 2% by the summer.” However, Villeroy also highlighted risks to France’s 2025 growth forecast of 0.9%, acknowledging that while downside risks persist, a recession remains unlikely.

    ECB’s Lane expects service inflation to ease

    ECB Chief Economist Philip Lane noted during an event today that services inflation will “come down quite a bit” in the coming months. He attributed much of the anticipated moderation to a slowdown in wage growth. Additionally, firms are reportedly experiencing reduced cost pressures, which should also contribute to easing price increases.

    Lane highlighted the challenges of providing a definitive future path for interest rates, citing significant uncertainties in the global economic environment, including escalating trade tensions.

    “From our point of view, saying here’s where we think the future rate path is going to be conveys a sense of certainty that we don’t feel,” Lane said, reinforcing the ECB’s cautious stance.

    On the topic of exchange rates and their influence on prices, Lane pointed out that while movements in the euro-dollar exchange rate can impact European prices over time, the short-term relationship is less predictable. He noted that in the early stages of a significant currency shift, much of the impact is “absorbed by firms.

    “The exchange rate, I think, over time plays a role,” Lane said. “But in terms of the month-by-month, quarter-by-quarter correlation between the exchange rate and import prices is not that stable.”

    UK CPI slows to 2.5% in Dec, services inflation down to 4.4%

    UK CPI slowed from 2.6% yoy to 2.5% yoy in December, below expectation of 2.7% yoy. Core CPI slowed from 3.5% yoy to 3.2% yoy, below expectation of 3.4% yoy.

    CPI goods annual rate rose from 0.4% yoy to 0.7% yoy, while CPI services annual rate fell from 5.0% yoy to 4.4% yoy.

    On a monthly basis, CPI rose by 0.3% mom, below expectation of 0.4% mom.

    BoJ’s Ueda signals rate hike on the table next week

    BoJ Governor Kazuo Ueda today provided further hints that the central bank may be considering a rate hike at its upcoming policy meeting.

    Ueda noted, “We are currently analyzing data thoroughly and will compile the findings in our quarterly outlook report. Based on that, we will discuss whether to raise interest rates at next week’s policy meeting and would like to reach a decision.”

    Ueda emphasized the significance of Japan’s wage outlook, which has recently been a key focus for policymakers. He pointed to encouraging signals from wage negotiations, which could bolster consumer spending and support BoJ’s inflation target.

    Additionally, Ueda remarked that the economic policies of the incoming US administration, coupled with domestic wage trends, would play a pivotal role in determining the timing of any rate adjustment.

    The governor’s remarks align closely with those of BoJ Deputy Governor Ryozo Himino, who earlier this week suggested that a rate hike was on the table.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0261; (P) 1.0286; (R1) 1.0333; More…

    EUR/USD’s recovery from 1.0176 extends higher today but stays below 1.0435 resistance. Intraday bias remains neutral while further decline is still expected. On the downside, break of 1.0176 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. However, considering bullish convergence condition in 4H MACD, firm break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Money Supply M2+CD Y/Y Dec 1.30% 1.20% 1.20%
    07:00 GBP CPI M/M Dec 0.30% 0.40% 0.10%
    07:00 GBP CPI Y/Y Dec 2.50% 2.70% 2.60%
    07:00 GBP Core CPI Y/Y Dec 3.20% 3.40% 3.50%
    07:00 GBP RPI M/M Dec 0.30% 0.70% 0.10%
    07:00 GBP RPI Y/Y Dec 3.50% 3.70% 3.60%
    07:00 GBP PPI Input M/M Dec 0.10% 0.20% 0.00%
    07:00 GBP PPI Input Y/Y Dec -1.50% -1.30% -1.90% -2.10%
    07:00 GBP PPI Output M/M Dec 0.10% 0.10% 0.30% 0.40%
    07:00 GBP PPI Output Y/Y Dec 0.10% 0% -0.60% -0.50%
    07:00 GBP PPI Core Output M/M Dec 0.00% 0.00%
    07:00 GBP PPI Core Output Y/Y Dec 1.50% 1.60%
    10:00 EUR Eurozone Industrial Production M/M Nov 0.20% 0.30% 0.00% 0.20%
    13:30 CAD Manufacturing Sales M/M Nov 0.80% 0.50% 2.10% 1.30%
    13:30 CAD Wholesale Sales M/M Nov -0.20% -0.70% 1.00%
    13:30 USD CPI M/M Dec 0.40% 0.30% 0.30%
    13:30 USD CPI Y/Y Dec 2.90% 2.90% 2.70%
    13:30 USD CPI Core M/M Dec 0.20% 0.20% 0.30%
    13:30 USD CPI Core Y/Y Dec 3.20% 3.30% 3.30%
    13:30 USD Empire State Manufacturing Jan -12.6 -1.8 0.2
    15:30 USD Crude Oil Inventories -1.0M -1.0M
    19:00 USD Fed’s Beige Book

     



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  • Greenback Holds Ground After Slight PPI Miss, Sterling Weakens Again as Gilt Yields Eye 5%

    Greenback Holds Ground After Slight PPI Miss, Sterling Weakens Again as Gilt Yields Eye 5%


    Dollar is holding steady against its peers in early U.S. trading, with softer-than-expected PPI report failing to trigger significant selling pressure. Market sentiment continues to shift toward the possibility that the Fed might refrain from additional rate cuts in 2025. Fed funds futures are currently pricing in less than 60% probability of a 25bps rate reduction in the first half of the year.

    Attention now turns to Tuesday’s U.S. Consumer Price Index (CPI) data, which is anticipated to be a more significant indicator of inflationary trends and policy direction. Currently, the market expects a significant interest rate differential of 200-300 basis points between Fed and ECB by the terminal point of the currency easing cycle. Should domestic inflationary pressures in the US show any signs of resurgence, this differential could skew further toward the higher end of the range, solidifying Dollar strength.

    Meanwhile, the Pound continues to bear the brunt of market concerns over the UK’s fiscal health. The relentless selloff in UK government bonds drove 10-year Gilt yield to above 4.9%, with a break above 5% psychological barrier appearing increasingly imminent. Such a move could intensify the downward pressure on Sterling, which is already grappling with domestic economic challenges. The UK is bracing for a pivotal week, with CPI data scheduled for Wednesday and GDP figures following on Thursday. These releases could determine whether the Pound can stabilize or face further deterioration.

    On the weekly leaderboard, Sterling is the worst performer so far, followed by Yen and Dollar. Kiwi leads the pack with Aussie and Loonie close behind. Euro and Swiss Franc remain in middle positions.

    In Europe, at the time of writing, FTSE is down -0.13%. DAX is up 0.83%. CAC is up 0.86%. UK 10-year yield is down -0.004 at 4.887. Germany 10-year yield is up 0022 at 2.617. Earlier in Asia, Nikkei fell -1.83%. Hong Kong HSI rose 1.83%. China Shanghai SSE rose 2.54%. Singapore Strait Times fell -0.08%. Japan 10-year JGB yield rose 0.0319 to 1.244.

    US PPI rises 0.2% mom, 3.3% yoy in Dec, miss expectations

    US producer prices rose modestly in December, with PPI for final demand increasing by 0.2% mom, falling short of market expectations of 0.3%. The gain was driven primarily by 0.6% mom increase in goods prices, which included a sharp 3.5% rise in energy costs.

    In contrast, prices for services remained flat. Excluding the more volatile components of food and energy, core PPI was unchanged for the month, missing the anticipated 0.2% mom increase.

    On an annual basis, headline PPI edged higher from 3.0% to 3.3% yoy, narrowly below the forecast of 3.4% yoy. Core PPI, excluding food and energy, rose from 3.4% to 3.5% yoy, also underwhelming expectations of 3.8% yoy.

    BoJ’s Himino signals rate hike possible in upcoming meeting

    In remarks today, BoJ Deputy Governor Ryozo Himino signaled that a rate hike remains a tangible possibility at the upcoming policy meeting. He said the board “will discuss whether to raise interest rates next week, base its decision on thee projections detailed in the quarterly outlook report.

    Himino stated, “When the appropriate timing comes, we must shift policy without delay, as the effect of monetary policy is said to show up with a lag of one to one-and-a-half years.”

    The Deputy Governor clarified that BoJ does not rely on a predefined “checklist” for rate decisions. Instead, the board intends to thoroughly analyze the economic outlook and inflation expectations to determine the next steps.

    Australian Westpac consumer sentiment dips again, RBA easing unlikely before May

    Australia’s Westpac Consumer Sentiment fell -0.7% mom in January, settling at 92.1, reflecting a second consecutive decline. However, Westpac noted a divergence within the data: current conditions sub-indexes weakened, while forward-looking measures were flat or showed slight gains.

    RBA faces a mixed picture as it prepares for its next policy meeting on February 17–18. While the central bank appears increasingly confident about bringing inflation back within its 2–3% target range, labor market “stopped easing” in the latter half of 2024 and subdued consumer surveys highlighted “mixed signals”.

    According to Westpac, RBA is likely to keep interest rates unchanged in February, with an easing cycle more probable to commence in May.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2131; (P) 1.2172; (R1) 1.2244; More…

    Intraday bias in GBP/USD remains neutral as consolidations continue above 1.2099 temporary low. While stronger recovery cannot be ruled out, outlook will stay bearish as long as 1.2486 support turned resistance holds. Break of 1.2099 will resume the decline from 1.3433 to 100% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 AUD Westpac Consumer Confidence Jan -0.70% -2%
    23:50 JPY Bank Lending Y/Y Dec 3.10% 3.10% 3.00% 2.90%
    23:50 JPY Current Account (JPY) Nov 3.03T 2.59T 2.41T
    05:00 JPY Eco Watchers Survey: Current Dec 49.9 49.6 49.4
    11:00 USD NFIB Business Optimism Index Dec 105.1 100.8 101.7
    13:30 USD PPI M/M Dec 0.20% 0.30% 0.40%
    13:30 USD PPI Y/Y Dec 3.30% 3.40% 3.00%
    13:30 USD PPI Core M/M Dec 0.00% 0.20% 0.20%
    13:30 USD PPI Core Y/Y Dec 3.50% 3.80% 3.40%

     



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