Asian and European stock markets recovered from yesterday’s small setback. The empty EMU eco calendar made way for passive sideways trading on main FI and FX markets. Dynamics changed after the early US eco releases. Housing starts barely corrected from the January surge while building permits unexpectedly jumped by 9.2% M/M. Additionally, producer price inflation spiked by 0.5% M/M and 2.1% Y/Y (vs 0.1% M/M & 1.6% Y/Y expected). The better US eco data pulled the US Note future lower. US Treasuries underperformed German Bunds. US yields add 1.1 bp to 1.8 bps across the curve while German yield changes are limited to 1 bp. 10-yr yield spread changes vs Germany are barely noticeable. The US dollar continues to perform strongly, especially against the Japanese yen today. USD/JPY pierced the 110-level, rising to 110.70. It’s the strongest level since May last year. The trade-weighted dollar surpassed the 99.50 mark, heading to the 2019 high (99.67). The greenback faced more difficulties against the euro to extend this month’s stellar run. EUR/USD continues to change hands just above 1.0778 support. Non-voting Atlanta Fed governor Bostic said that the US economy is in a good place and that it can go on. Inflation is pretty close to target. Regarding the outlook, risks aren’t pointing to concerns, but the coronavirus and the US elections create some uncertainties. Attention shifts to the FOMC Minutes later today. Investors will be looking for confirmation of the mildly dovish twists in the Fed statement and in Powell’s comments. Several other Fed members hit the wires as well and we’re keen to find out whether the corona outbreak already altered their thinking.

Sterling couldn’t really profit from higher-than-expected CPI inflation numbers. Headline and core readings respectively rose to 1.8 Y/Y and 1.6% Y/Y, releasing some pressure of the BoE to use their final interest rate bullet in the near-term. We look for confirmation from the economic side in tomorrow’s retail sales and Friday’s PMI’s. EUR/GBP gyrated in the low 0.83-area. The EUR/GBP 2019 sell-off low (0.8277) remains nearby.

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Headline inflation in Canada accelerated in January from 0% m/m to 0.3% vs. 0.2% expected. That is 2.4% on a yearly basis, up from 2.2% in December. Underlying price pressures retreated though from a 2% y/y cycle high to 1.8%. The mixed report didn’t leave a trace on the loonie, which is trading at 1.3225 to the dollar, slightly stronger compared to opening levels.

Swedish CPI inflation surprised to the downside in January, printing at -1.4% m/m or 1.3% y/y (resp. -1.1% and 1.7% expected) and down from 0.4% (1.8% y/y) in December. The Riksbank’s preferred gauge CPIF tumbled with a more than anticipated -1.5% m/m to end up at 1.2% y/y (core: -1.4% m/m, 1.6% y/y). The Swedish krona erased most of its kneejerk losses throughout the day as at least part of the inflation disappointed lies in technical, rebalancing factors.

The Turkish central bank trimmed the one-week repo rate with 50 bps from 11.25% to 10.75%, largely as expected. It was the sixth consecutive rate cut by the central bank that applied a policy rate of 24% from September 2018 to June 2019 in an attempt to stem the slide in the Turkish lira. EUR/TRY marginally gains, trading at 6.56.


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