North American Summary and Highlights 12 February

North American session

US CPI with a 0.5% increase, 0.4% ex food and energy, with the latter 0.446% before rounding, was clearly stronger than expected and the USD bounced sharply with UST yields up around 10bps across the board. UST yields remained higher, and USD/JPY sustained its gains, rising to near 154.35 from near 153.50, but elsewhere the USD bounce was erased, while equities erased much of their losses seen after the data. 

EUR/USD near 1.04 was up modestly from 1.0370 before the data, but well up from post-data lows below 1.0320 if off a high of 1.0430. EUR advanced versus GBP and CHF with GBP/USD and USD/CHF little changed. AUD and CAD both saw modest gains though AUD/USD could not hold above .63.  

Reasons for the reversal in the USD were unclear. Some felt high inflation might dissuade Trump from imposing aggressive tariffs, while Trump expressing optimism on a ceasefire in Ukraine after talking with Putin may have supported the EUR. Fed’s Powell gave a fairly cautious response to the CPI whole testifying to the House though stated he wanted to keep policy restrictive for now.

European morning session

A quiet European morning saw EUR/USD edge up 15 pips to 1.0375, while AUD/USD lost 15 pips to 0.6275. USD/CAD was also firmer, at 1.4310 from 1.4295. But the biggest movers were the scandis, with EUR/NOK rising 6 figures to 11.67 and EUR/SEK up 4 figures to 11.29.  

There was no obvious rationale for any of these moves, with little movement in bond yields or equities, and the modest decline in the oil price comes after a few days of gains so has limited significance for the NOK. There was a small rise in Swedish unemployment reported at the beginning of the session, and some comments from then Riksbank’s Bunge, but these came after the main SEK decline. The SEK weakness looks more likely to be a technical corrective move after the EUR/SEK declines in the past week.