North American Summary and Highlights 23 Jan

Overview - The USD was stronger, as JPY gains were reversed and the ECB bank lending survey hit the EUR.
North American sessionThe USD made ground across the board through the North American session. EUR/USD lost around 50 pips to a low near 1.0825, and there were similar USD gains elsewhere, with GBP/USD touching 1.2650 and USD/JPY gaining a little more than half a figure to move above 148.50. There wasn’t much news to drive the USD gains, but US yields were higher on the day, and the Eurozone consumer confidence numbers were a little below expectations, albeit well above recent lows. January’s Richmond Fed survey showed manufacturing weaker, but services slightly improved.European morning sessionThe USD was generally firmer through the European morning, with the EUR losing ground on the crosses after another weak ECB bank lending survey. EUR/USD fell back around 40 pips to 1.0870, while the USD was also generally stronger elsewhere, except against the JPY. USD/JPY fell sharply early in the European morning, hitting a low at 147, but bounced back to finish the session little changed at 147.85. The JPY move was a response to the Ueda press conference. He signalled there is more confidence in wage growth as more big firms had decided to hike wage this year. The focus of BoJ remain on wage/inflation dynamics as they see current above target inflation not sustainable until wage growth further pick up towards 2%. Specifically, Ueda hinted that the next move in policy will be in April as they suggest they will have more data at April meeting compared to March. Moreover, Ueda restated that even if real wages are negative, a policy change is possible.The Q4 2023 bank lending survey (BLS) saw EZ banks moderately tighten their credit standards further for loans in the last quarter of 2023. For ECB hawks, who have suggested that the fall in market interest rates in the last few months constitutes an easing in financial conditions, the BLS points very much in the opposite direction. Indeed, it adds to the substantial cumulative tightening in credit standards since 2022, which has contributed, together with weak demand, to the strong fall in loan growth to firms and where there has also been a marked cumulative fall in credit demand. However, the tightening was less marked than in the previous quarter and there was little sign that the fall in deposit volumes was having much impact in affecting credit supply