US DATA: Stronger-Than-Expected PPI, But PCE Elements Look Soft
Feb-13 13:47
Lots to get through on this PPI report but we note upward revisions to sequential December producer prices, and pay special attention to the beats on the Y/Y figures - these are not just the result of seasonal factor revisions, they are just straight-up beats (ex-food/energy/trade 3.4% Y/Y vs 3.1% expected, 3.5% prior rev up from 3.3%). PPI momentum thus looks stronger overall at the moment.
- BUT a few standouts in the details for PCE that at first glance make it look soft for the translation: airline passenger services fell 0.3% M/M (after +5.0%), portfolio management decelerated to 0.4% (after 0.6%), health/medical insurance fell 1.1% (after 0.1%), and indeed the broad set of medical services categories decelerated/were deflationary in January.
- We will go through this in more detail shortly.
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FOREX: USDJPY Drops ~40pips on Soft PPI, 158 Handle Continues to Cap Topside
Jan-14 13:44
- USDJPY moderates back below 157.50 on the release of weaker-than-expected PPI data from the US, although the positive reaction for equities is now offsetting this reaction. Recent flurries above the 158.00 handle, into the prior intervention zone, have capped the USDJPY upside as markets continue to weigh recent BOJ rhetoric ahead of the Jan meeting.
- As a reminder, Deputy Gov. Ryozo Himino said the bank will discuss whether to raise the policy rate or not at the meeting on Jan. 23-24, based on the latest outlook for the economy and prices. Himino believes it is not normal for negative real interest rates to persist once shocks and deflationary factors are resolved. For reference, our policy team suggests that a January rate hike still looks likely, as the policy rate would still remain in accommodative territory.
- Rabobank have said that on the assumption that the BoJ hikes rates cautiously but consistently in 2025, they see scope for USDJPY to move back to 145 on a 12-month view.
US TSY FUTURES: BLOCK: Mar'25 10Y Buy
Jan-14 13:44
- +5,000 TYH5 107-16, initial post-time offer at 0833:06ET, DV01 $325,000. The 10Y contract has since pared gains and trades 107-12 last (+4.5).
US DATA: Unrounded PPI Confirm Soft Report Vs Expectations
Jan-14 13:39
Unrounded December PPI figures look soft across the board vs expectations:
- PPI final demand 0.22% M/M (0.40% prior; 0.4% rounded expected)
- ex-food/energy 0.04% M/M (0.24% prior, 0.3% rounded expected)
- ex-food/energy/trade 0.07% M/M (0.11% prior, 0.3% rounded expected)
- No revisions to the unrounded Nov M/M figures
