Dollar Tumbles Broadly as CPI Matched Expectations, Risk Cleared

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Dollar tumbles broadly in early US session even though consumer inflation data hit multi-decade highs. The move could be seen as a result of clearing the risk of even worse inflation reading that could force Fed’s hand. For now, Canadian Dollar is the strongest one as boosted by rally in oil prices. Sterling and Aussie are following closely on broad risk-on sentiment. On the other hand, Yen is under some selling pressure.

echnically, EUR/USD finally breaks out to the upside today, after staying in range for more than a month. We’ll now look at GBP/USD’s reaction to 1.3833 resistance and 0.7277 resistance in AUD/USD to further confirm Dollar’s weakness. Meanwhile, Gold could also follow by breaking 1831.66 resistance to resume the rebound from 1752.32

In Europe, at the time of writing, FTSE is up 0.74%. DAX is up 0.37%. CAC is up 0.48%. Germany 10-year yield is down -0.044 at -0.067. Earlier in Asia, Nikkei rose 1.92%. Hong Kong HSI rose 2.79%. China Shanghai SSE rose 0.84%. Singapore Strait Times rose 0.27%. Japan 10-year JGB yield dropped -0.0255 to 0.129.

US CPI rose to 7.0% yoy in Dec, core CPI rose to 5.5% yoy

US all-item CPI accelerated from 6.8% yoy to 7.0% yoy in December, matched expectations. The annual rate was the largest increase since June 1982. Core CPI accelerated from 4.9% yoy to 5.5% yoy, above expectation of 5.4% yoy. That’s the highest level since February 1991. The energy index rose 29.3% yoy while food index rose 6.3% yoy.

Eurozone industrial production rose 2.3% mom in Nov, EU up 2.5% mom

Eurozone industrial production rose 2.3% mom in November, well above expectation of 0.6% mom. Production of non-durable consumer goods rose by 3.2%, capital goods by 1.5%, energy by 1.2% and intermediate goods by 0.9%, while production of durable consumer goods fell by -0.2%

EU industrial production rose 2.5% mom. Among Member States for which data are available, the largest monthly increases were registered in Ireland (+37.3%), Poland (+5.9%) and Czechia (+4.8%). The highest decreases were observed in Belgium (-4.4%), Malta (-3.7%) and Luxembourg (-2.3%).

BoJ Kuroda: Consumer inflation likely to gradually accelerate

In a speech to regional branch managers, BoJ Governor Haruhiko Kuroda said “Japan’s economy is picking up as a trend, although it remains in a severe state due to the impact of the coronavirus pandemic.” The economy is expected to recover ahead as coronavirus impact eases.