Weaker Yen But Investor Attention Shifting to U.S. CPI Data Release Later This Morning
February 12, 2025
Bank of Japan Governor Ueda’s failure to use testimony before the Diet to pinpoint possible timing of next central bank interest rate hike sent the yen sliding 0.6% overnight against the dollar and by even more versus other currencies. Against other currencies, the dollar lost 0.3% versus the Swiss franc, 0.2% vis-a-vis the euro and 0.1% relative to sterling but edged marginally higher versus the Canadian, Australian, New Zealand, Chinese, and Mexican monies.
U.S. January consumer price results are due to be reported at 13:30 GMT (8:30 EST) and will be gleaned for clues to when the Fed’s interest rate might next be cut. Chairman Powell’s senate testimony yesterday did nothing to revive hopes of a rate reduction as soon as next month’s review. He will reprise that testimony today before the House Financial Services Committee starting at 10:00 EST. One topic that repeatedly was raised by senator questions yesterday was the increasingly prevalent incidence of debanking, where banks either close out bank accounts or simply deny extending loans to customers.
Equity markets in the Pacific Rim closed higher today by 2.6% in Hong Kong, 1.9% in Singapore, 1.7% in Indonesia, and 0.9% in China. U.S. stock futures and European markets thus far show scant movement.
Ten-year sovereign debt yields have risen three basis points in Japan, two bps in Germany and Great Britain and a single basis point in the United States, France, Italy and Spain.
Oil and gold prices have fallen back 1.3% and 0.9%, but Bitcoin is a bit firmer.
Two African central banks changed their interest rates but in opposite directions:
- The Bank of Zambia’s policy rate was lifted by 50 basis points to 14.5%, the highest level since February 2017. The rate was raised three times last year by a total of 250 basis points and was increased by 200 bps during 2023. A pandemic low of 8.0% prevailed from August 2020 until an initial tightening in February 2021. Zambian consumer price inflation last month of 16.7% matched December’s 37-month high, having bottomed previously at 9.4% in the first month of 2023. 16.7% is twice the target range ceiling of 8%.
- A 25-basis point cut in the Bank of Namibia’s key interest rate to 6.75% was the fourth cut of that size since August 2024. The new rate level is its lowest in a year. CPI inflation decelerated from a peak of 7.3% in August 2022 to a 44-month low of 3.0% last October and, at 3.2% last month, continues to hover near that level.
Consumer price data reported earlier today showed
- That inflation in India had settled back from a 14-month high of 6.2% in October to a 4-month low of 4.3% last month.
- Czech consumer prices inflation slid back 0.2 percentage points in January and posted a 2.8% 12-month rate of increase for the third time in four months. That’s also well down from the 18.0% cyclical peak in September 2022.
- Portuguese inflation decelerated half a percentage point in January to 2.5%, which matches November’s 4-month low. Portugal‘s 10.1% peak inflation rate late in 2022 had been its highest since April 1992.
- In Mongolia, prices rose on month by 1.4% in January, lifting the 12-month rate of increase to a 16-month high of 9.6%. Mongolian inflation had previously decelerated from a 159-month high of 16.1% in mid-2022 to a 39-month low of 5.1% last June.
The stock of Japanese M2 money rose 1.3% year-on-year in January, which was roughly aligned with its pace in the second half of 2024. Machine tool orders in Japan, which tend to trace an erratic year-on-year path, slowed to a 12-month increase last month of 4.7% following fourth-quarter readings of 9.9% in October, 3.0% in November and 11.2% in December. Even so, the result in January exceeded analyst forecasts.
Between December 2023 and December 2024, industrial production rose 3.2% in India but fell by 3.8% in Belgium and 7.1% in Italy. Retail sales rose 1.8% in Indonesia and 5.4% in Malaysia in that same one-year span.
Postscript: U.S. consumer price inflation in January exceeded expectations, rising 0.1 percentage point (ppt) to a 7-month high of 3.0% overall and also by 0.1 ppt when excluding food and energy to print at 3.3% for the fourth time in the last five months. Led by food and especially eggs due to the outbreak of bird flu, food price inflation of 2.5% is 0.4 ppts higher than in October. Non-energy service sector prices went up 0.5% on month, led by a 1.8% monthly leap in transportation services such as car insurance. Separately, the German current account surplus widened to a 9-month high EUR 24.0 billion in December. A surplus of 249 billion euros in 2024 was similar to the 2023 surplus, which had been equivalent to 5.8% of GermanGDP.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Namibia, Bank of Zambia, Powell and Ueda testimonies, U.S. CPI
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