Well this is going to be a boring post given the big news is the President of the United States endorses trashing the US dollar and thereby ramping up inflation and interest rates. Clown show.
For the session ahead here in Asia-Pac we'll have Bank of Japan December meeting minutes.
The December BoJ meeting was an interesting one. The Bank raised its short term cash rate in January of 2025 and then followed up, finally, at this December meeting with another rate hikes. From the day:
- Bank of Japan bookends the year
- Yen slides further after BOJ press conference
On December 28 we got the Summary from that meeting:
- BoJ signals more rate hikes ahead as policy seen far from neutral. JPY trades higher.
The TL;DR from the Summary:
BoJ says policy rate remains far below neutral despite recent hike
Several members favour steady further rate increases
Real interest rates seen staying deeply negative even at 0.75%
Yen weakness and bond yields partly blamed on overly low rates
Stronger wage-price dynamics reinforce tightening case
The minutes will give further details on the discussions and opinions.
Since then, of course, the biggest of big news is the 'rate check' intervention that has lopped off 600 or so points from USD/JPY.
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Also on the agenda today is CPI data from Australia. The labour market data last week reignited chatter over a potential February (meeting is Feb. 2 & 3) rate hike from the Reserve Bank of Australia:
- Australia jobs surge in December, lifting AUD and RBA rate hike expectations
The inflation data will provide more input on this.
Westpac analysts expect Australian inflation to continue moderating in the December quarter after a softer-than-expected November CPI outcome. The bank has revised down its December quarter forecasts to 0.5% q/q for headline CPI and 0.7% q/q for the trimmed mean, from 0.6% and 0.8% previously. For December alone, Westpac estimates CPI rose 0.9% m/m, lifting annual inflation to 3.7%. The December monthly trimmed mean is forecast at 0.1% m/m and 3.2% y/y, with the three-month pace slowing to 0.4%, reinforcing signs that underlying inflation pressures are easing.
Analysts at Commonwealth Bank of Australia expect the December CPI to reinforce the case that underlying inflation pressures remain too strong for the RBA’s comfort. CBA forecasts headline CPI to rise 0.3% m/m in December, lifting annual inflation to 3.8%, while the trimmed mean is seen rising a firm 0.9% q/q and 3.3% y/y. That outcome would keep inflation well above levels consistent with the RBA’s target and supports CBA’s view that policy tightening begins in February 2026. For the Australian dollar, confirmation of persistent inflation and a credible near-term hike path would likely provide AUD support, particularly against low-yielding peers.
This article was written by Eamonn Sheridan at investinglive.com.