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Asian session forex traders shrugged of today’s data releases and focused on overall risk appetite and dollar selloff.

  • Australian markets out on Australia Day holiday
  • Japan’s core CPI (y/y) steadies at 0.9% in December
  • Tokyo’s core CPI (y/y) slips from 0.8% to 0.7% vs. 0.8% expected
  • BOJ’s Dec. meeting minutes: still appropriate to “pursue powerful monetary easing”
  • BOJ’s Dec. meeting minutes: “indicators of medium- to 15 long-term inflation expectations had stopped declining”
  • PBoC raises yuan midpoint for a 6th day in a row, skips open market operations

Major Events/Reports:

Japan’s inflation reports

Looks like the Bank of Japan (BOJ) still has its work cut out for it! Data from the world’s third largest economy revealed few changes in consumer prices.

Japan’s headline CPI clocked in a 1.0% annualized gain in December, which is better than the 0.6% uptick that we saw in November. Taking out volatile items such as fresh food reveals a 0.9% increase, which is in line with the previous release.

Not surprisingly, food prices led the gains with its 1.8% annual increase. This is not only better than the 0.1% decrease in November, but it also marks the first uptick in three months AND the fastest rate since December 2016.

On a monthly basis, prices had risen by 0.2%, slower than November’s 0.7% growth. Last but not the least is Tokyo’s core CPI – widely considered a leading indicator for the nation’s prices – which came in at 0.7% against expectations of a 0.8% growth.

With core consumer prices barely budging from last month’s numbers, the BOJ has more incentive to keep its easy policies steady for longer. That didn’t seem to have affected yen traders, though, since they were too busy pricing in overall risk appetite in the markets.

Yuan hits 25-month highs

Earlier today the People’s Bank of China (PBoC) lifted its yuan mid-point for a sixth day in a row, this time taking it to 6.3436 per dollar. And since spot rates are allowed to rise or fall by as much as 2.0%, the yuan ended up rising to its strongest levels against the Greenback since November 2015.

We don’t have far to look for a reason. Trump’s comments from the previous trading session dragged on the scrilla for a while, but it seems like not a lot are convinced that the Treasury Department will change its tune regarding the benefits of a weaker currency on the economy.

It also doesn’t hurt that PBoC skipped open market operations today, which effectively drained more liquidity out of the banking system. Is China stepping up its game to get the yuan to replace the dollar as the world’s funding currency?

Major Market Mover(s):

USD

The Greenback gave up some of its post-Trump gains as forex traders went back to pricing in not-so-dovish central bank statements and a bit of risk-taking.

USD/CHF slipped by another 0.21% to .9387;
USD/JPY fell by 0.02% to 109.38;
GBP/USD popped up by 0.36% to 1.4189, and
EUR/USD shot up by 0.28% to 1.2427.

Watch Out For:

  • 7:45 am GMT: France’s business survey to remain at 112.0?
  • 7:45 am GMT: France’s consumer confidence (106.0 expected, 105.0 previous)
  • 9:30 am GMT: U.K.’s preliminary GDP (q/q) expected to maintain 0.4% growth
  • 9:30 am GMT: U.K.’s services index (0.4% expected, 0.3% previous)