European Summary and Highlights 14 Feb

European morning session

GBP fell back through the European morning after weaker than expected UK January VCPI data. The y/y rates for both headline and core were unchanged from December at 4.0% and 5.1% respectively, - both 0.1% below market expectations. EUR/GBP rise around 35 pips to 0.8530, reversing Tuesday’s decline, as UK yields fell around 10bps at the front end of the curve.

The USD was generally a little firmer through the morning, with EUR/IUSD falling around 10 pips to test below 1.07, and USD/JPY also up around 10 pips to 150.60. AUD/USD bucked the trend, edging up around 10 pips to 0.6575 as equities rallied helped by generally lower bond yields.

Other data included Eurozone industrial production, which rose a surprise 2.6% m/m in December, although much of this was due to an erratic looking 23.5% rise in Ireland. Norwegian mainland GDP rise 0.2% in Q4, slightly above expectations, while Eurozone employment was up 0.3% as expected in Q4. Eurozone Q4 GDP was confirmed as unchanged q/q in Q4.

Asia session

Following the strong overnight U.S. CPI, USD/JPY has jumped past 150 figure to a high of 150.88. We are hearing verbal intervention from Suzuki saying that he is closely watching FX market moves with strong sense of urgency. While in a medium run, the JPY should correct on yield differential narrowing, the BoJ and Japanese Finance Ministry may react to short term slump in the JPY as any sharp movements are unfavorable for Japan, especially at such extreme level against the USD .  On its mark, USD/JPY dropped 0.19% to 150.48.

The USD has retraced a part of its gains on Wednesday Asia, along with U.S. Treasury Yields, after a strong Tuesday. U.S. equities are few points in the red while regional equities are performing individually.  Both the AUD and NZD caught a breath against the USD and see AUD/USD up 0.21% to 0.6467 and NZD/USD up 0.27% to 0.6077 while USD/CAD slipped 0.05% to 1.3556. Elsewhere, EUR/USD is up 0.06% and GBP/USD is up 0.1%.