Yesterday’s release of the US Consumer Price Index (CPI) for January showed growth that exceeded market consensus expectations in both year-on-year and core year-on-year figures. While US inflation remains subdued, there is a sense that its momentum has stalled recently. In the short-term financial markets, where a rate cut starting in May or June had been fully priced in prior to the announcement, the outlook has shifted to July. The rapid increase in US bond yields has coincided with strengthened buying of the dollar.
The Dollar Index found support at its 10-day moving average, signaling a renewed uptrend in the dollar. USDJPY extended its gains to 150.89, remaining in the mid-150 yen range. Despite the usual rhetoric from Japanese officials such as Finance Minister Kanda and Finance Minister Suzuki to curb yen strength, the response in favor of yen appreciation has been limited.
The Nikkei average, which surged more than 1000 yen the previous day, is seeing some correction today, although the range is limited. There are observations in the market that foreign investors are eyeing Japanese stocks, which have shown resilience even amidst declines in indices like the Dow Jones. Yesterday marked the NISA day for February 13th, and it’s reported that foreign investment funds and ETFs are gaining popularity in the new NISA system. Domestic individual investors are increasingly engaging in foreign currency buying and yen selling through funds and ETFs.
Today, it seems that selling pressure has entered the GBP due to the UK Consumer Price Index coming in lower than expected. While prices have already moved significantly, I’ll be looking to sell GBPUSD on any retracements.
