European Summary and Highlights 31 Jan
The USD was net little changed in the European morning, but saw some modest losses against the EUR and AUD while gaining a little ground against the CAD.
European morning session
The USD was net little changed in the European morning, but saw some modest losses against the EUR and AUD while gaining a little ground against the CAD. Initially, USD/JPY fell sharply from 147.90 to 147.40, but recovered nearly all this ground by the end of the session. GBP/USD also saw short-lived gains to 1.2695 before falling back to opening levels near 1.2670.
EUR/USD gained around 10 pips on the session, despite weak German retail sales data released at the open. This showed a 1.6% m/m decline in December following a 2.2% decline in November, and was well below consensus. German state CPI and French preliminary CPI data were both broadly in line with expectations.
Asia session
Australian Q4 headline CPI has come in lower at 4.1% y/y vs 4.3% expected and shows further moderation from 5.4% in Q3. In q/q basis, headline CPI is also lower at 0.6% from 1.2% in Q3. RBA trimmed mean CPI is 4.2% y/y and 0.8% q/q, both shows moderation and misses estimate. It aligns with our forecast and should allow the RBA to remain on hold. AUD/USD sunk on its mark to 0.6565, 0.56% lower for the session along with sour regional sentiment. NZD/USD also dragged lower by soft sentiment by 0.38% to 0.6612 while USD/CAD rose 0.16% as oil lost 10 cents.
While we are waiting for U.S. military action in response to the latest attack, Iran's UN envoy warns any attacks will be met with response, indicating such tit for tat retaliation will persist and increase uncertainty in the region. General sentiment is tilting to the soft side but we could see the indecisiveness as ranges are so far small. U.S. Treasury Yields are lower across the curve while JGB yields are higher. USD/JPY is trading 0.06% higher at 147.69. Elsewhere, EUR/USD is down 0.24% and GBP/USD is down 0.17%.