Europe Summary and Highlights 15 January
The USD was generally weaker through the European morning, although losses were generally modest.
European morning session
The USD was generally weaker through the European morning, although losses were generally modest. USD/JPY was the biggest mover, dropping around half a figure to 156.80, while EUR/USD gained just 10 pips to 1.0305. GBP/USD managed 20 pips to 1.2225, and there were similar small gains in AUD and CAD.
The main news on the morning was the December UK CPI data. Consensus was for headline CPI to remain unchanged at November’s 2.6%, but there was a drop to 2.5%, very similar to EZ headline inflation. This December figure was driven by higher petrol costs while the headline masked a drop in both core and services inflation of 0.3% and 0.6% respectively, the almost three–year low of 4.4% in services thereby providing a much more reassuring message than the November data. Looking at the CPI details, adjusted data also painted a much softer picture than base-effected y/y numbers, but EUR/GBP nevertheless only gained briefly, and finished the morning slightly lower at 0.8430, despite the data knocking almost 10bps of UK front end yields.
Other data was much as expected, with the German annual GDP data showing a 0.2% decline, suggesting a 0.1% decline in Q4.
Asia session
Former Japan MoF vice minister for international affairs., Tatsuo Yamasaki, says Trump and Japan can work together to send USD/JPY lower. While it is definitely the best option to keep a lid on USD/JPY, you can only clap with both hands and we haven't heard from Yellen nor Trump on such proposal. On the other hand, BoJ's governor Ueda is once again brewing hope for a rate hike with his remarks on will raise rates if improvement in economy & price conditions continues and being positive about wage. However, we have been here before and whether Ueda is brewing false hope again will only be known when we hear "leaks" a day before the BoJ meeting. So far, market participants are buying the story and see USD/JPY lower 0.26% at 157.52.
The equity market shows indecisiveness on Wednesday after a minor rebound on Tuesday. Major equity indexes are tilted towards the down side but range bound. The FX market is also relatively quiet except the JPY. AUD/USD is trading 0.02% lower at 0.6193, NZD/USD is unchanged at 0.5604 while USD/CAD is up 0.05% as oil slips thirty cents. Else, EUR/USD is down 0.04% and GBP/USD is down 0.08%.