US INFLATION: U.S. Inflation Insight: Hot Start To 2025, Details Aside
Feb-13 20:54
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- Sequential price pressures in the January CPI report exceeded all expectations, but the hawkish impact was blunted 24 hours later by relatively benign PPI details.
- The core CPI reading of 0.446% M/M sa (MNI unrounded analyst median 0.30, av 0.29) was only partially offset by recent downward revisions in Q4 data.
- The reading reflected stronger pressures in all major sub-categories in January, with “supercore” inflation accelerating sharply, and housing ticking higher.
- And while “residual seasonality” may have played a part in boosting January inflation, the Y/Y reading – based on non-seasonally adjusted data – at 3.26% exceeded consensus by 0.1pp, and the NSA M/M data wasn’t particularly strong.
- Following the data, Fed Chair Powell cautioned in his congressional testimony that while CPI “was above almost every forecast”, it would be “wise” to wait for the PPI report which would help fill in the gaps for PCE which is as he said “a better measure of inflation”.
- And while the January PPI aggregates came in above expected, the broad array of individual price categories that feed into PCE came in significantly softer than most had anticipated, spurring analysts to downwardly revise their core PCE estimates to well below the CPI equivalent – if still too high for comfort.
- While a March Fed cut had already looked out of the question, the CPI release pared implied 2025 cumulative rate cuts from 37bp to just 25bp, but PPI details saw a partial reversal to 32bp.
- With no clear disinflationary progress, the next rate cut is now seen by markets in October, vs September prior to this week’s data.
- Attention turns to import price data to round out January core PCE estimates, which following CPI and PPI look centered in the mid-0.20s% M/M. That would be an uptick from 0.16% prior but would still translate into a slowdown in the Y/Y rate to 2.6% from 2.8%.
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US TSYS: Tsys Bid But Well Off PPI Highs in Lead-Up to CPI Wednesday
Jan-14 20:44
- Treasuries are holding mildly higher levels after the bell, well off this morning's post-PPI data highs as as markets delved into the PPI details where most PCE components were on the soft side with the notable exception of airfares, which typically jump in December.
- The Mar'25 10Y contract trades +3 at 107-10.5 after the bell compared to 107-18.5 post data high - well below initial technical resistance at 108-21.5/109-06 (20-day EMA / High Dec 31). Curves bull steepened on the day: 2s10s +2.715 at 42.358, 5s30s +2.558 at 38.859.
- Focus turns to tomorrow's headline CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December. Core goods inflation will be closely looked at amidst heavy focus on potential tariffs under the second Trump administration but also with a further near-term dampening factor from continued US dollar appreciation.
- Analysts look for core goods inflation between 0.2-0.3% M/M after it accelerated to 0.31% M/M in Nov for a 19-month high. That was the third consecutive monthly increase in core goods prices after sequential deflation in 14 of the previous 15 months.
- Scheduled Fed speakers for Wednesday include Richmond Fed Barkin at 0920ET (text, Q&A), MN Fed Kashkari fireside chat at 1000ET (no text, Q&A), NY Fed Williams keynote address CBIA eco-summit at 1100ET (text, Q&A) and Chicago Fed Goolsbee Midwest economics forum at 1200ET (no text, Q&A). Fed Beige Book is released at 1400ET.
AUSSIE 10-YEAR TECHS: (H5) Bearish Structure Intact
Jan-14 20:39
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.615/851 - High Dec 31 / High Dec 11
- PRICE: 95.325 @ 20:27 GMT Jan 14
- SUP 1: 95.275 - Low Nov 14 (cont) and a key support
- SUP 2: 95.224 - 1.000 proj of the Dec 11 - 23 - 31 price swing
- SUP 3: 94.537 - 1.0% 10-dma envelope
The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851, and has traded through the Dec low. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. A break of this level would strengthen a bearish theme. For bulls, a reversal higher and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.
USDJPY TECHS: Bullish Outlook
Jan-14 20:31
- RES 4: 160.00 Round number resistance
- RES 3: 159.45 High Jul 12
- RES 2: 159.26 0.618 proj of the Sep 16 - Nov 15 - Dec 3 price swing
- RES 1: 158.87 High Jan 10
- PRICE: 157.91 @ 20:30 GMT Jan 14
- SUP 1: 156.78/02 20-day EMA / Low Dec 31
- SUP 2: 154.71 50-day EMA
- SUP 3: 154.44 Low Dec 19
- SUP 4: 153.16 Low Dec 17
The trend condition in USDJPY remains bullish and the pair is holding on to the bulk of its recent gains. Last week’s fresh cycle high, reinforces the bullish theme. The recent breach of 156.75, the Nov 15 high, confirmed a resumption of the uptrend and opens 159.45, the Jul 12 ‘24 high. Moving average studies are in a bull-mode position highlighting a dominant uptrend. Initial firm support is 156.78, the 20-day EMA.
