European Summary and Highlights 19 Jan
The USD fell against the AUD and JPY but gained a little ground against GBP and was unchanged against the EUR in the European morning.
European morning session
The USD fell against the AUD and JPY but gained a little ground against GBP and was unchanged against the EUR in the European morning. USD/JPY fall back from around 148.50 at the open to below 148, while AUD/USD tested above 0.66 after opening at 0.6575. EUR/USD was not much changed close to 1.0880, while GBP/USD was a little weaker, falling 20 pips to 1.2680 after the weak UK December retail sales data.
The UK retail sales data showed a 3.3% decline in sales volumes in December, the largest decline since 2008 excluding the pandemic. This is possibly partly due to sales having been brought forward but still shows broad weakness and points to similar drop in Q4 consumer spending as seen in Q3, with ensuing downside GDP risk. Most startling is the level of real sales is weaker than prior to the pandemic, albeit not a marked as clear slump during COVID.
Otherwise the only significant data was German December PPI, which came in weaker than expected at -1.2% m/m, -8.6% y/y.
Asia session
The Japan December CPI followed the pace of moderation shown in Tokyo CPI last week. National December Headline CPI y/y came in lower at 2.6% from 2.8%, less fresh food 2.3% from 2.5%, less fresh food and energy at 3.7% from 3.8%. Ex fresh food and energy CPI remain stubborn but we are seeing headline and ex fresh food CPI moving closer to 2%. The report does not change our forecast nor the broader picture with BoJ more focused on wage. The softer CPI sent USD/JPY higher and was met with "jawbone intervention" from Suzuki. Yet, USD/JPY still trades 0.28% higher at 148.55. Both the U.S. Treasury and JGB Yields are higher across the curve.
Despite guidelines from the Chinese government to limit short sell, regional equities remain depressed. However, the "National Team" stepped in to sell USD and buy Yuan to stall the fall after PBOC's strong fix. Aussie received some proxy support and only got a haircut of 0.02% to trade lower at 0.6571, NZD/USD slipped further by 0.34% to 0.6095 while USD/CAD rose 0.05%. Elsewhere, EUR/USD is 0.05% higher and GBP/USD is 0.04% lower.