Europe Summary and Highlights 19 December
USD/JPY continued to move sharply higher through the European morning, gaining 135 pips to 157.35 from an open near 156.
European morning session
USD/JPY continued to move sharply higher through the European morning, gaining 135 pips to 157.35 from an open near 156. EUR/JPY made yet another all time high reaching 184.34. There is no obvious rationale for JPY losses, with JPY yields slightly higher following the BoJ rate hike and nothing surprising coming from BoJ governor Ueda’s press conference, but the lack of surprises has clearly been taken as a green light to sell JPY. Despite recent verbal intervention, there is so far no new comment from Japanese officials on JPY weakness nor any sign of actual FX intervention.
Otherwise, the USD was generally not much changed, making only very marginal gains against the EUR, CAD and scandis. GBP/USD was little changed and EUR/GBP edged very slightly lower after UK retail sales data showed a small 0.1% decline in November, but with a slight upward revision to October the trend remained quite steady. UK public sector borrowing in November was a little higher than expected at GBP11.65bn. Otherwise, the German Gfk consumer climate index for January dipped to its lowest since March 2024.
Asia session
The Japan November National CPI arrived at 2.9%, ex fresh food, ex fresh food & energy at 3%. With the inflationary pressure lingers around 3%, it is supportive for the BoJ to hike rates in the December meeting. And indeed as per forecast, the BoJ has hiked rates by 25bps in the December meeting and bring short term interest rate to 0.75%. It came as no surprise given the current inflationary dynamic and the October hold was mostly political. The forward guidance continue to be copy and paste from the BoJ with ambiguity on the timeline of next rate hike. USD/JPY rises by 0.31% to 155.93 for most of the hike is priced in and Ueda's press conference may not bring any hawkish surprise.
The broader risk sentiment is upbeat as we see regional and U.S. equity indexes, except Dow Jones, all pointed north. Nikkei is so far leading the gains as there has not been much hawkish surprise from the BoJ. The greenback is trading broadly higher as we see the EUR/USD down 0.03%, GBP/USD down 0.06%, AUD/USD down 0.1% and NZD/USD down 0.26% while USD/CAD rises 0.08%.