Upside surprise in inflation has provided a gut check for sentiment: Housing costs, including persistently higher rents, accounted for more than half of the rise in these CPI numbers- (less significant for core PCE) - Keeping with broader optimism reaction was mostly skeptical - deemed as just a brick in the wall of worry, but every brick counts.
Neither anyone said this was the start of a new surge higher nor anyone dismissed it as a blip preceding a quick trip to below-average inflation era. Instead, oodles of articles claiming it was a sign prices are stickier than first thought and Fed has its work cut out.
Rate cut story is getting muted with each passing day but continues to stay as a dominant driver. We find ourselves going against the grain, where we see the reasons to be cautious on factoring cuts - but US 10 years has been circling 4% - this market does not want to push too much higher in yield.
Today we have Kashkari's speech and PPI - who cares about all these niceties-
Concerns about protracted EZ economic weakness continue. Lagarde: the 'hardest part was likely over -interest rates would be cut if ECB had certainty that inflation had fallen to 2% level.1.0875, 38.2% Oct/Dec rise is key, break to see 1.0793 50%
China Jan-Dec USD-denominated exports -4.6% y/y. Imports -5.5% y/y. We are leading up to key Taiwanese elections over the weekend.
It's all about USD weakness than GBP strength. Slew of UK data to be dismissed by the markets in the current mindset howsoever negative it turns out to be. However to stay below 1.2773 (last week's peak - half-a-pip beyond Dec 29 high)
Fridays normally used to surprise in the past but that was the story - Euphoria outweighs the carry constraint - to stay respectful of 83.00 base as usual.
Reports now about BoJ considering lowering its inflation outlook for 2024 to mid-2% range. Nov labour cash earnings data soft. No respite from Yen weakness - doors opened for upside in USDJPY- breached 50% Fibo 146.10 but did not close above it. Break above that would target 61.8% at 147.47.