MNI EUROPEAN OPEN: Japan CPI - Core Pressures Remain High Y/Y

Aug-22 05:22By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

POWELL, BAILEY, LAGARDE, UEDA TO SPEAK AT JACKSON HOLE - MNI
DIVISIONS GROW INSIDE FED AHEAD OF DECISION ON SEPTEMBER RATE CUT - WSJ
FED’S GOOLSBEE SAYS HE HOPES DANGEROUS INFLATION DATA WAS A BLIP - BBG
JAPAN’S INFLATION HOVERS WELL ABOVE BOJ’S GOAL EVEN AS IT SLOWS - BBG
CHINA ADVISORS & ECONOMISTS SHARE THEIR RATES OUTLOOK - MNI

Fig 1: Japan CPI Trends Y/Y - Headline Softer But Core Steady

Source: MNI - Market News/Bloomberg/Refinitiv.

DEFENCE (BBG): “The UK is bolstering its air defense capabilities with a new contract for missile systems, as European military planners work to map out a post-peace plan for Ukraine that could see its skies protected by western allies.”

CONSUMER CONFIDENCE (BBG): "GfK in London reports consumer confidence rose to -17 in August vs -19 in July"

UKRAINE (BBG): “Efforts to establish security guarantees for Ukraine as part of a US-led push to end Russia’s war are running into difficulties almost immediately.”

UKRAINE/RUSSIA (RTRS): “Vladimir Putin is demanding that Ukraine give up all of the eastern Donbas region, renounce ambitions to join NATO, remain neutral and keep Western troops out of the country, three sources familiar with top-level Kremlin thinking told Reuters.”

JACKSON HOLE (MNI): Federal Reserve Chair Jerome Powell will deliver opening remarks at the Kansas City Fed's annual Jackson Hole symposium Friday at 10 a.m. ET, and Andrew Bailey, Christine Lagarde and Kazuo Ueda, leaders of the Bank of England, ECB and Bank of Japan, respectively, will discuss labor market transition on a panel Saturday at 12:25 p.m. ET.

FED (WSJ): “Two Federal Reserve officials offered competing assessments of the labor market that highlight looming divisions over how the central bank should approach trade-offs when considering whether to cut interest rates next month.”

FED (BBG): “Federal Reserve Bank of Chicago President Austan Goolsbee said while some recent inflation readings have come in better than expected, he hopes one “dangerous” data point is just a blip.”

TECH (WSJ): “The Trump administration is considering taking equity stakes in companies receiving funds from the 2022 Chips Act but has no plans to seek shares in bigger semiconductor firms that are increasing their U.S. investments, according to a government official.”

OTHER

JAPAN (BBG): “The pace of Japan’s consumer inflation stayed well above the Bank of Japan’s 2% target even as price growth moderated, supporting market speculation that the central bank will hike its benchmark interest rate again this year.”

NEW ZEALAND (BBG): “The Reserve Bank of New Zealand doesn’t need to be too stimulatory with policy because it views the recent lull in economic activity as temporary, according to Chief Economist Paul Conway.”

THAILAND (BBG): "Former Thai leader Thaksin Shinawatra was cleared of royal defamation charges, a major reprieve for the politician whose family-backed parties have strongly influenced the nation’s politics for more than two decades."

CHINA

RATES (MNI): Chinese advisors and economists share their rates outlook.

CONSUMPTION (CSJ): “China’s financial authorities will focus on supporting the supply of quality consumer services, such as healthcare, entertainment, and education, to offer better choices that encourage spending and help unlock the potential of the country’s consumer market, China Securities Journal reports, citing experts.”

HOUSING (SECURITIES DAILY): “More than ten Chinese cities have eased regulations on the use of housing provident funds — a government savings program used to help people buy homes — since the start of this month, Securities Daily reports, as the country seeks to bolster its property market.”

FISCAL (SECURITIES DAILY): “Local government special bonds and ultra-long special sovereign bonds will continue to serve as key instruments of China’s fiscal policy in the near term, Securities Daily reports, citing industry experts.”

US/CHINA (BBG): “Nvidia Corp. has instructed component suppliers including Samsung Electronics Co. and Amkor Technology Inc. to stop production related to the H20 AI chip, the Information reported, citing unidentified sources.”

MNI: PBOC Net Injects CNY123.2 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY361.2 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY123.2 billion after offsetting maturities of CNY238 billion today, according to Wind Information

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4344% at 09:30 am local time from the close of 1.5140% on Thursday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Thursday, compared with the close of 48 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1321 Fri; -0.72% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1321 on Friday, compared with 7.1287 set on Thursday. The fixing was estimated at 7.1874 by Bloomberg survey today.

MARKET DATA

JAPAN JULY NATL CPI Y/Y 3.1%; MEDIAN 3.1%; PRIOR 3.3%
JAPAN JULY NATL CPI EX FRESH FOOD Y/Y 3.1%; MEDIAN 3.0%; PRIOR 3.3%
JAPAN JULY NATL CPI EX FRESH FOOD, ENERGY Y/Y 3.4%; MEDIAN 3.4%; PRIOR 3.4%

UK AUGUST GFK CONSMER CONFIDENCE -17; MEDIAN -19; PRIOR -19

MARKETS

US TSYS: Front-End Edges Lower In Quiet Session

The TYU5 range has been 111-15 to 111-20 during the Asia-Pacific session. It last changed hands at 111-18, up 0-00+ from the previous close.

The US 2-year yield has edged lower trading around 3.783%, down 0.01 from its close.
The US 10-year yield is trading around 4.325%.
10-Year Yields are still firmly within its wider 4.10%-4.65% range. The 4.35% pivot area continues to hold for now, the market will now be waiting for any clues from Powell's upcoming Jackson Hole speech.
In the US, all eyes are on Jackson Hole. Known WSJ Fed Watcher Nick Timiraos has published an article titled, "Divisions Grow Inside Fed Ahead of Decision on September Rate Cut - WSJ via BBG". The article presents contrasting views on the Fed outlook, with Cleveland Fed President Beth Hammack stating: ""I see an inflation picture that is too high and rising, and moving in the wrong direction," while adding: " The labor market remains "reasonably good," she said, creating no reason to lower interest rates at the Sept. 16-17 policy meeting."
Zerohedge on X: “UBS: "All eyes are on Fed Chair Powell’s speech at the Jackson Hole Symposium. While markets are hoping for forward guidance on rate cuts, there’s a growing sense that Powell may deliver a retrospective “exit” speech, potentially disappointing those looking for dovish signals."
Otavio Costa on X: “The probability of rate cuts has already fallen by nearly 30 percentage points, yet still hovers around 70%. In my view, expectations are likely to shift further — from near-certainty of cuts to none at all. To be clear, this is not supportive for risk assets.”

Fig 1: 10-Year US Yield 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

JGBS: Subdued Session, Market Awaits Jackson Hole

JGB futures are unchanged compared to the settlement levels.

Japan July nationwide CPI was close to market expectations. Headline printed at 3.1%y/y, in line with market forecasts, while prior was 3.3%. The ex fresh food measure was slightly above expectations at 3.1% (3.0% was forecast and June printed at 3.3%). The ex fresh food, energy core measure was steady at 3.4%y/y, in line with the consensus estimate (3.4% was also the June outcome).
Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session ahead of Jackson Hole.
Federal Reserve Chair Jerome Powell will deliver opening remarks at the Kansas City Fed's annual Jackson Hole symposium on Friday at 10 a.m. ET, and Andrew Bailey, Christine Lagarde and Kazuo Ueda, leaders of the Bank of England, ECB and Bank of Japan, respectively, will discuss labour market transition on a panel Saturday at 12:25 p.m. ET.
Cash JGBs are flat to 1bp cheaper across benchmarks, with a steepening bias.
Swap rates are flat to 1bp lower, with swap spreads tighter.
On Monday, the local calendar will see Coincident/Leading Index and Dept Sales data.

AUSSIE BONDS: Cheaper, All Eyes Turn To Jackson Hole

ACGBs (YM -3.0 & XM -3.5) are weaker after a subdued session ahead of Jackson Hole.

Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session ahead of Jackson Hole.
Known WSJ Fed Watcher Nick Timiraos has published an article titled, "Divisions Grow Inside Fed Ahead of Decision on September Rate Cut - WSJ via BBG". The article presents contrasting views on the Fed outlook, with Cleveland Fed President Beth Hammack stating: ""I see an inflation picture that is too high and rising, and moving in the wrong direction," while adding: " The labor market remains "reasonably good," she said, creating no reason to lower interest rates at the Sept. 16-17 policy meeting."
Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at -1bp.
The bills strip has bear-steepened, with pricing -1 to -4.
RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in September is given a 27% probability, with a cumulative 34bps of easing priced by year-end.
On Monday, the local calendar will be empty, ahead of the RBA Minutes on Tuesday.
Next week, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Wednesday and A$1000mn of the 2.75% 21 November 2028 bond on Friday.

BONDS: NZGBS: Modest Bear-Steepener Ahead Of Jackson Hole

NZGBs closed cheaper but off the session’s worst levels, with benchmark yields 2-4bps higher.

Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session ahead of Jackson Hole. Federal Reserve Chair Jerome Powell will deliver opening remarks at the Kansas City Fed's annual Jackson Hole symposium on Friday at 10 a.m. ET, and Andrew Bailey, Christine Lagarde and Kazuo Ueda, leaders of the BoE, ECB and BoJ, respectively, will discuss labour market transition on a panel Saturday at 12:25 p.m. ET
(Bloomberg) – “New Zealand’s central bank should establish a prudential policy committee and appoint new board members with bank regulation expertise, according to a recommendation from a parliamentary inquiry into banking competition.”
(Bloomberg) - "The Reserve Bank of New Zealand views the recent lull in economic activity as temporary, according to Chief Economist Paul Conway. Conway said the central bank doesn't need to be overtly stimulatory with policy, and that the economy is expected to pick up in response to the current policy settings."
Swap rates closed modestly higher, with the 2s10s curve steeper.
RBNZ dated OIS pricing closed 1-2bps firmer across meetings. 17bps of easing is priced for August, with a cumulative 35bps by November 2025.
On Monday, the local calendar will see Retail Sales Ex Inflation data.

FOREX: Asia FX Wrap - USD Extends Higher Into Jackson Hole

The BBDXY has had a range of 1210.14 - 1211.97 in the Asia-Pac session, it is currently trading around 1212, +0.10%. The USD saw further reduction of shorts overnight as we await Powell's speech at Jackson Hole. Depending on the contents of Powell's speech this could change very quickly but the BBDXY looks to be putting in a third higher low which would be a worrying sign to the bears that we could be putting in a short-term base. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows. A hawkish tilt from Powell would potentially see these gains extend.

EUR/USD - Asian range 1.1589 - 1.1617, Asia is currently trading 1.1590. The market is trading sideways in a 1.1600-1.1750 range heading into Jackson Hole. The pair is unlikely to extend too far as the market awaits Powell's speech.
GBP/USD - Asian range 1.3401 - 1.3423, Asia is currently dealing around 1.3400. Having broken back above its pivot look for dips to again be supported, with risk retracing the pair is probing its first support seen towards 1.3400. A move back below 1.3350 risks a move to the bottom of the range once more.
USD/CNH - Asian range 7.1817-7.1882, the USD/CNY fix printed 7.1321, Asia is currently dealing around 7.1880. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
Cross asset : SPX +0.01%, Gold $3330, US 10-Year 4.325%, BBDXY 1212, Crude Oil $63.49
Data/Events : EZ Negotiated Wages, Germany GDP, France Business & Man Confidence/Retail Sales

Fig 1: GBP/USD Spot 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

JPY: Asia Wrap - USD/JPY Extends Above 148.50

The Asia-Pac USD/JPY range has been 148.28-148.72, Asia is currently trading around 148.70, +0.22%. USD/JPY managed to push strongly off its 146/147 support area overnight as the USD saw more gains due to the market reducing shorts ahead of Powell's speech. Price still remains firmly within the wider 146.00-151.00 range. CFTC Data shows leveraged funds have bought this dip in USD/JPY betting the support remains intact. The buyers are expecting a more hawkish lean from Powell.

Japan Headline CPI Moderates, Core Measures Stay Sticky : Japan July nationwide CPI was close to market expectations. Headline printed at 3.1%y/y, in line with market forecasts, while prior was 3.3%. The ex fresh food measure was slightly above expectations at 3.1% (3.0% was forecast and June printed at 3.3%). The ex fresh food, energy core measure was steady at 3.4%y/y, in line with the consensus estimate (3.4% was also the June outcome).
(Bloomberg) - “The yen looks vulnerable to domestic stagflation and the looming risk of a non-committal Fed. USD/JPY’s tight link with short-term spreads leaves it exposed to shifts in Fed expectations. Traders have recently scaled back bets on a September interest-rate cut thanks to stronger US data. There’s the increasing chance that Powell’s Jackson Hole speech will further push back the prospect of easing.”
Options : Close significant option expiries for NY cut, based on DTCC data: 147.90($1.59b).Upcoming Close Strikes : 148.00($912m Aug 26), 147.95($885m Aug 27), - BBG.
CFTC data shows last week asset managers maintained their JPY longs +60866( Last +60532), leveraged funds used the dip to add to their newly built short JPY position -41257(Last -29308).

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

AUD: Asia Wrap - AUD/USD Consolidates Above 0.6400 Into Jackson Hole

The AUD/USD has had a range of 0.6419 - 0.6430 in the Asia- Pac session, it is currently trading around 0.6425, +0.05%. The AUD has traded sideways in an exceptionally quiet session. The AUD is consolidating just above 0.6400 heading into Jackson Hole. Pivotal support is back towards 0.6300/50 which has been the bottom in its recent multi-month range of 0.6350-0.6650.

Bloomberg - “Nvidia told suppliers Samsung and Amkor to stop production of its H20 AI chip after Beijing urged local firms to avoid using it, The Information reported. Nasdaq futures gave up their gains.”
“Bank of America expects further downside in the US dollar. The dollar’s July recovery looks to be short-lived as further stagflationary risks are mounting, wrote Alex Cohen, the US bank’s New York-based FX strategist. Potential rate cuts amid increasing inflation create fertile ground for dollar depreciation, while investors also need to contend with the possibility of US data credibility erosion.” - BBG
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6525(AUD350m). Upcoming Close Strikes : 0.6525(AUD570m Aug 27) - BBG
AUD/JPY - Asia-Pac range 95.20 - 95.51, Asia is trading around 95.50. The pair found some demand around 94.50 and has bounced overnight, sellers should be around back towards 96.00 now. A sustained break below the 94.00/94.50 area is needed to potentially begin a trend lower again.

Fig 1: AUD/USD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZD: Asia Wrap - NZD/USD Trades Heavy Still, Just Above 0.5800 Support

The NZD/USD had a range of 0.5808 - 0.5823 in the Asia-Pac session, going into the London open trading around 0.5810, -0.15%. The NZD is consolidating into Jackson Hole just above the pivotal support in the 0.5800 area, but with the break lower on the dovish RBNZ would expect sellers to be around on bounces back toward the 0.5900 area, CFTC data shows lots of room to add to shorts. US Futures have turned lower today on Nvidia, E-minis -0.02%, NQU5 -0.10%.

(Bloomberg) - “The Reserve Bank of New Zealand views the recent lull in economic activity as temporary, according to Chief Economist Paul Conway. Conway said the central bank doesn't need to be overtly stimulatory with policy, and that the economy is expected to pick up in response to the current policy settings.”
"NZ AGRICULTURE MINISTER MCCLAY MET WITH US'S GREER THIS WEEK. AGREE DAIRY FARMERS IMPORTANT TO BOTH GOVERNMENTS, STEEL, ALUMINUM, PHARMACEUTICALS TIMBER ALSO DISCUSSED. AGREE TRADE OFFICIALS TO MEET OVER COMING MTHS.” - BBG
Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6200(NZD355m Aug 27) - BBG
CFTC Data shows Asset Managers have cut their longs completely and started to rebuild a short adding slightly in the NZD -3679(Last -1811), the Leveraged community though reduced their own shorts slightly -4190(Last -6778).
AUD/NZD range for the session has been 1.1030 - 1.1051, currently trading 1.1050. The dovish RBNZ has seen the Cross surge higher breaking back above 1.100 convincingly. This move should now see dips supported as it looks to build momentum to push higher.

Fig 1: NZD/USD Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

ASIA STOCKS: China Rally Continues, Thailand Up As Ex-PM Thaksin Cleared

The standout so far today in Asia Pac equities is further gains in China mainland stocks. The CSI 300 is up close to 1.2%, putting the index near the 4340 region. Elsewhere trends are mixed. US equity futures sit little changed in the first part of Friday dealings, with all eyes on Fed Chair Powell's speech at Jackson Hole later today US time. Market focus will be on September easing hints, while earlier remarks from Fed Governors showed conflicted viewpoints on the current inflation/labor market trade off (per the WSJ).

The CSI 300 continues its recent strong rally into the weekend. Earlier headlines that US chip maker Nvidia will suspend producing H20 chips has aided local China chip makers. This development is likely to mean domestic consumers of chips have to rely more on chips made in China. Elsewhere, gains look to mostly reflect better earnings results.
Onshore media also noted that private funds attracted strong inflows into local stocks in July: China’s private securities investment funds attracted over 100 billion yuan (approximately $13.9 billion) in fresh capital in July, as investors flocked to equity-focused products amid signs of recovery in the domestic stock market, Shanghai Securities News reports." (via BBG)
The HSI is up as well, last around 0.30% higher.
Japan markets are mixed, with the Topix up 0.4%, but the NKY 225 down 0.15%. July inflation data saw headline pressures ease as expected, while core measures remained sticky.
In Thailand, ex-PM Thaksin was cleared of a Royal insult charge, although this ruling may be appealed. We also have further political cases coming up in Thailand. Still, the SET is up around 0.90% so far, with a good bulk of the move since the Thaksin headlines crossed.
Most other SEA markets are up at this stage, while India has opened down. Australia and NZ are weaker, with NZ curbing post RBNZ gains from earlier this week.

Oil Trending Sideways into Weekend

Oil prices have done very little in the Asia trading day despite further headlines from the Trump administration.
Comments from the Trump administration that they expected additional tariffs on India as a result of the country's Russian crude purchases had driven prices higher overnight but that momentum stalled in Asia. This came as India pledged to keep buying Russian oil "depending on the financial benefit", according to Vinay Kumar, India's ambassador in Moscow.
Elsewhere, Asian oil refiners have been buying crude from further afield, including the US, Brazil, and Nigeria, due to President Donald Trump's trade and foreign policy approach.
The region that consumes around 35-40% of the world's oil historically buys the majority of its supply from the middle east. However US trade and foreign policy has seen purchases from the US to Brazil and Nigeria increase.
Norway's second-biggest oil and gas company Aker BP ASA said exploration in the Norwegian North Sea resulted in one of the largest discoveries of oil made on the continental shelf in the last decade.
WTI is steady at US$63.50 bbl to remain over 1% higher for the week. It remains however below all major moving averages, the nearest being the 20-day EMA of $64.36.
Brent is trading around where it started at US$67.60 in the Asia trading day. Brent has had a very strong week, up over +2.6% which has seen it trade above the 20-day EMA of $67.50.

Gold Down Modestly Ahead of Jackson Hole

Gold fell in Asia trading today as it waited for signals on interest rates from Jackson Hole.
Gold is down -0.30% at US$3328.92 and remains below the all time high in June of $3,432.
Gold had clung on to minor weekly gains, however today's falls puts it down by -0.20% for the week.
Gold has traded in tight ranges this week and remains wedged between the 20-day EMA of $3,344.20 and the 50-day EMA of $3,334.50
Swiss gold exports to the US surged last month to the highest since March, with shipments of bullion jumping to almost 51 tons in July. Record bullion exports worth more than $36 billion made up more than two-thirds of Switzerland's trade surplus with the US in the first quarter.
Gold is expected to hold onto gains into 2026 following a rally to a record earlier this year, Australia's biggest listed miner of the metal said after reporting that full-year profit more than doubled

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
22/08/2025	0600/0800	**	SE	Unemployment
22/08/2025	0600/0800	***	DE	GDP (f)
22/08/2025	0645/0845	**	FR	Manufacturing Sentiment
22/08/2025	0900/1100		EU	Q2 Negotiated Wage Growth
22/08/2025	1230/0830	**	CA	Retail Trade
22/08/2025	1230/0830	**	CA	Retail Trade
22/08/2025	1400/1000		US	Fed Chair Jerome Powell
22/08/2025	1400/1000	***	US	US Fed Chair Speech
22/08/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
22/08/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly