Article Highlights

  • AU NAB business confidence shoots up from 6 to 10
  • China’s CPI (y/y) up improves by 2.5% vs. 2.4% uptick expected, 2.1% growth previous
  • China’s PPI (y/y) up by 6.9% vs. 6.6% expected, 5.5% previous
  • Japan’s industrial production revised higher from 0.5% to 0.7%
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Jitters ahead of Yellen’s testimony limited dollar demand during the Asian forex trading session, while overall risk aversion didn’t stop comdoll bulls from pricing in China’s strong CPI and further recovery in oil prices.

Major Events:

China’s inflation reports – Data released earlier today saw consumer prices of the world’s second largest economy rising by its fastest rate in two and a half years.

China’s CPI rose by 2.5% from a year earlier in January after climbing by 2.1% in December. This is not only higher than analyst estimates of a 2.4% uptick, but it also marks the fastest pace since mid-2014.

A closer look tells us that the surge in consumer demand mostly came from Spring Festival-related purchases as well as some Chinese companies passing along the rising costs of raw materials.

On a monthly basis, consumer prices have risen by 1.0% following a 0.2% uptick in December and against expectations of a 0.7% growth. It’s the third consecutive monthly increase and is the strongest since February 2016. A closer look tells us that increases in transportation, food, and tourism contributed over 60% of the 1.0% uptick for the month. Now that’s a party!

Meanwhile, a separate gauge of factory prices printed a 6.9% increase in the 12 months to January, beating forecasts of a 6.3% annualized gain. This marks the fifth consecutive month of price increase and the highest jump since 2011.

Overall, analysts are cautiously optimistic over today’s releases. While it’s a good sign that producer and consumer prices are steadily rising, market players are also waiting for seasonal factors to fade before they put their stamp of approval over China’s economic revival.

Overall dollar weakness – The Greenback lost pips across the board ahead of Janet Yellen’s semi-annual testimony in front of the Senate. For trading newbies out there, you should know that word around the (forex) hood is that Yellen won’t be as hawkish as the other Fed members were at the beginning of the year. Specifically, traders aren’t keeping their fingers crossed that Yellen will hint at a rate hike in March or April.

It also didn’t help the dollar’s cause that U.S. National Security Adviser Michael Flynn resigned following his failure to disclose the full extent of his conversations with Russian officials. Yipes!

Major Market Movers:

USD – The dollar got clobbered across the board ahead of Janet Yellen’s highly-anticipated testimony.

USD/JPY dropped by 8 pips (-0.07%) to 113.56, USD/CHF slipped by 5 pips (-0.05%) to 1.0051, and USD/CAD fell by 7 pips (-0.05%) to 1.3060.

AUD – AUD/USD climbed by 27 pips (+0.35%) to .7671, AUD/JPY shot up by 23 pips (+0.27%) to 87.10, and AUD/NZD popped up by another 32 pips (+0.30)% to 1.0687.

Watch Out For:

  • 8:00 am GMT: German preliminary GDP (0.5% expected, 0.2% previous)
  • 8:00 am GMT: German final CPI expected to remain at -0.6%
  • 9:15 am GMT: Switzerland PPI (0.3% expected, 0.2% previous)
  • 9:15 am GMT: Switzerland CPI expected to remain at -0.1%
  • 10:00 am GMT: Italian preliminary GDP (q/q) expected to remain at 0.3%
  • 10:30 am GMT: U.K. CPI (1.9% expected, 1.6% previous)
  • 10:30 am GMT: U.K. PPI (1.0% expected, 1.8% previous)
  • 10:30 am GMT: U.K. core CPI (1.7% expected, 1.6% previous)
  • 10:30 am GMT: U.K. house price index (6.9% expected, 6.7% previous)
  • 11:00 am GMT: Euro Zone flash GDP (0.5% expected and previous)
  • 11:00 am GMT: German ZEW economic sentiment (15.1 expected, 16.6 previous)
  • 11:00 am GMT: Euro Zone industrial production (-1.4% expected, 1.5% previous)
  • 11:00 am GMT: Euro Zone ZEW economic sentiment (22.3 expected, 23.2 previous)

See also:

U.S. Session Recap
London Session Recap

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