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Headline CPI inflation printed significantly below expectations in January due to a 50% discount on electricity rates for some customers. It printed at 0.8% y/y down from 1.6% y/y, while core ticked up 0.1pp to 2.4% y/y due to higher gold prices. Goldman Sachs continues to forecast that Bank Indonesia will again cut rates 25bp in Q2 with the risks “balanced” around the view. It sees the low inflation outcomes in January/February as “likely to be temporary if the electricity tariff discounts are reversed from March as currently planned”.

• Goldmans notes that “Indonesia's headline CPI inflation fell significantly to 0.8% yoy in January, the lowest since 2000. Today's reading was meaningfully below our and Bloomberg consensus expectations. On a seasonally adjusted sequential basis, headline CPI inflation fell 0.9% mom s.a. in January, after rising 0.2% mom s.a. in the previous month”.
• “Housing, water, electricity & household fuels inflation slowed to -8.8% yoy in January (vs. 0.6% yoy in December) due to a temporary 50% electricity tariff discount. This shaved 1.4pp from headline inflation in January, compared to a +0.1pp contribution the previous month.”
• “Meanwhile, food, beverage & tobacco inflation increased 3.7% yoy in January (vs. 1.9% yoy in December) mainly due to higher red chili, rice and protein prices. This contributed 1.0pp towards headline inflation in January, compared to 0.5pp the previous month.”

USD/CNH tracks near 7.3130 in early Tuesday dealings. Monday and earlier lows today were around the 7.3010 level, which came very close to the 20-day EMA support point. A reminder that yesterday's intra-session highs were at 7.3734, which was just short of record levels for the pair. Onshore markets remain closed for another session, returning from the LNY break tomorrow. 

• USD/CNH pulled back as Monday's session unfolded. A WSJ article noted the authorities were unlikely to devalue the currency in the wake of trade conflict risks with the US. Further support was evident for CNH amid headlines that Canada and Mexico had negotiated a 1 month tariff delay.
• Focus in the near term will be on whether China can be successful in negotiating a similar outcome, ahead of planned tariff implementation of 10% later today US time at midnight Tuesday (which is a few hours away).
• If we do see such an outcome, further pullback in USD/CNH is likely although is unlikely to be as dramatic as the moves seen in CAD and MXN through, as CNH sentiment was not as bearish in recent sessions compared to these two currencies.
• Outside of the 20-day EMA, we have the 50-day at 7.2865/70, while further south is the 100-day, around the 7.2540 level. 

USD/JPY is tracking higher in early Asia Pac dealings, the pair last near 155.20/25. This is around 0.30% above end NY levels from Monday, but we remain within recent ranges. Risk appetite in the FX space is much improved following delays to Mexican and Canadian tariffs. This has seen yen safe haven demand wane.

• From a technical standpoint, recent key levels have not been challenged. Upside resistance is likely at Jan 23 highs, at 156.75, while on the downside, 153.72 the Jan 27 low is a potential support zone.
• In the cross asset space, global equity markets finished Monday trade down, but US futures are positive in the first part of Tuesday dealing. Eminis are up 0.60%, Nasdaq futures 0.80% firmer. Focus will be on whether China negotiations with the US potentially lead to a tariff delay as well, which could influence broader USD/risk trends. Yen is likely to underperform if we see further uptick in risk appetite.
• US-JP yield differentials were relatively steady but sit a touch up from recent lows.
• Yen lost around 0.50% against CAD on Monday, albeit in very volatile conditions as sentiment was whipsawed around by tariff headlines. MXN/JPY is back above 7.61, against intra-session lows on Monday of 7.2934, a +4% rebound. AUD/JYP is back to 96.50/55 after yesterday's brief dip sub 95.00.
• On the local data calendar, we have just had Jan monetary base figures print, we were -2.5% y/y (not a typical market mover).
• In the option expiry space, note the following for NY cut later today: Y152.00($500mln), Y154.00($663mln).