Consumer prices in China drop, Yen bulls struggle

China’s consumer prices decline sharply

In January 2024, China witnessed a significant drop in consumer prices, marking the most substantial decline since 2009. The year-on-year decrease of 0.8% reflects the fourth consecutive month of falling prices, a streak not seen since October 2009. These figures surpassed market expectations, pointing to the most pronounced reduction in over 14 years.

The prolonged deflationary trend in both consumer and producer sectors has raised calls for more assertive policy measures to support consumer demand.

Yen bulls face conviction challenge amid currency volatility

The yen, currently the biggest currency pain trade of the year, has experienced losses against the dollar within the Group-of-10 space. While timing remains crucial for identifying trend reversals, the real obstacle for yen bulls lies in their conviction.

Bank of Japan Deputy Governor Shinichi Uchida’s recent guidance has intensified the pressure. Uchida does not anticipate continuous rapid rate hikes after ending negative rates, and swaps indicate potential movement by April.

US labor market remains strong

In the United States, initial jobless claims declined by 9K to 218K last week, slightly below the estimated 220K. Continuing claims also eased by 23K to 1871K in late January. While the labor market continues to exhibit strength, signs of slowing persist.

Following the report, the dollar strengthened, and Treasury yields saw an uptick.