Asia Summary and Highlights 13 February
Japan PPI for January is +4.2%y/y
Asia Session
After a strong gain on U.S. CPI Wednesday, USD/JPY is taking a breather on Thursday's Asia session as market participants waiting for Trump's tariff plan. The January Japan PPI continues to edge higher but so far that has not been a good indicator of incoming inflation. Yet, it reminds market participants that the cost pressure in Japanese inflation are returning, whether transitory or not. USD/JPY is trading 0.02% higher at 154.43.
Risk sentiment seems to be improving on Thursday's Asia session. U.S. three major equity indexes have their toes in the green with HSI and Nikkei (lower than the opening high )marching north more than a percent while Chinese equities lag. Under such atmosphere, the USD is trading broadly softer. AUD/USD is up 0.16% at 0.6289, NZD/USD is up 0.26% to 0.5656 while USD/CAD slipped 0.31% to 1.4265. Else, EUR/USD is up 0.49% to 1.0433 and GBP/USD is up 0.35%.
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.