Japan, Powell-Trump, Iranian Protests and Imminent Release of U.S. December Consumer Price Data – Currency Thoughts
Four-Ring Circus: Japan, Powell-Trump, Iranian Protests and Imminent Release of U.S. December Consumer Price Data
January 13, 2026
The focus on Venezuela at the start of this year has quickly given way to other attractions like the spiraling street protests in Iran, President Trump’s relentless pursuit of Federal Reserve officials, fresh speculation about a possible snap election next month in Japan, and U.S. consumer price data that are expected to reflect a marginal acceleration last month.
Just prior to those data, the dollar is sporting overnight gains led by rises of 0.6% versus the won and 0.4% relative to the yen but otherwise upticks of only 0.1-0.2%. Ten-year sovereign debt yields climbed overnight by 7 basis points in Japan, 3 bps in France and Great Britain and 2 basis points in the United States, Germany, Italy and Spain. Japan’s Nikkei-225 charged 3.1% higher one day after the Coming of Age three-day weekend holiday and amid speculation that Prime Minister Takaichi, who favors fiscal stimulus and a stronger defense budget, may call early Diet elections next month to solidify a mandate for her objectives. The South Korean Kospi advanced 1.5% , and share prices in Hong Kong and Taiwan rose by 0.9% and 0.5%. Alternatively, equities in Europe and U.S. futures were down a bit. The price of silver has advanced another 0.9%. Bitcoin (+0.8%) is stronger, and WTI oil has risen back above $60.00 per barrel, as markets worry about the uncertain details of how President Trump plans to reignite Venezuelan oil production.
The released U.S. CPI figures proved generally benign. Core inflation stayed at November’s 56-month low of 2.6%, rather than ticking up 0.1 percentage point in alignment with analysts’ consensus. Overall consumer price inflation remained at 2.7% as expected and despite a half-percentage point pick-up in the food component to 3.1%. Service sector price inflation of 3.3% continued to show greater price pressure than other components, which is why a rate cut in the face of pressure from the Trump Administration could particularly hurt the credibility that Fed policy remains as independent as before.
The yen touched an 18-month low of 159.04 per dollar earlier today, prompting yet another protest from Finance Minister Katayama against overly one-sided movements in the currency. After the first of two dollar devaluations in 1971 and 1973 that led America to abandon fixed dollar parities, the yen was set at 308 per dollar, roughly 17% stronger than the parity that had prevailed since 1949. Over the 53-year span of the market-determined exchanged rate ear, the Japanese currency briefly strengthened through the 80 per dollar level in April 1995 and revisited the 70’s per dollar in 2011 with a high that year in August of 76.25. Relative to that record yen high, Japan’s currency is now 52% weaker against the dollar, and it has also fallen 12% nominally from its 2025 low last January. In inflation-adjusted terms, yen depreciation has been even more extreme than these comparisons.
The deadly street protests in Iran are attracting mounting attention especially in light of President Trump’s threat to use military force. Erupting just 13 months after the overthrow of the Assad regime in Syria, this new hotspot of geopolitical tension has aroused speculation that something similar might be possible in one of the three pillars of the Axis of Evil defined by former President George W. Bush over twenty years ago. Precious metal prices like gold and silver had already become very well-bid based on other geopolitical tensions before this later threat to world peace emerged.
The dollar’s soft tone in late December could have picked fresh momentum this month from the report over the past weekend of criminal charges being explored by the Justice Department against Fed Chairman Powell, but that momentum stopped overnight when the chairman did not turn the other cheek as he had repeatedly done in reaction to Trump’s increasingly harsh criticisms. More than anything else, financial market participants around the world wish to see the credibility of the Federal Reserve monetary policy preserved, as such as seen as an essential precondition to world prosperity and peace. Markets gave two-thumbs up instead today after Powell called out the Justice Department’s gambit as nothing more substantive than a “pretext” to influence U.S. monetary policy. This dynamic of hope could vanish quickly, as the future evolution of any case against the Fed is likely to be decided in the Supreme Court, an institution toward which public confidence has already deteriorated badly.
The United States was not today’s only economy to report price data. Greek CPI inflation rose 0.2 percentage points to a 4-month high of 2.6% last month. Greek inflation peaked earlier at 12.1% in mid-2022 and bottomed 15 months later at 1.6%. Also in December, CPI inflation eased to a 4-month low of 2.8% in the Netherlands and to an 8-month low of 6.8% in Belarus. Portuguese CPI inflation, which imploded from 10.1% in October 2022 to 1.4% by end-2023, matched November’s 9-month low of 2.2% in December. Czech CPI inflation likewise matched November’s 7-month low of 2.1% last month, and CPI inflation of 3.3% in Hungary represented a 14-month low. Latvian consumer price inflation slowed to a 9-month low of 3.5% in December from 3.8% in November and 4.3% October. Croatian producer price inflation dived sharply from a 22-month high of 2.0% in November to an 8-month low of 0.1% in December.
Japanese data releases today included the December economy watchers survey of service sector workers that revealed a 3-month low in perceived current conditions but a 2-month high in their outlook. On-year growth in bank lending accelerated from 3.5% in the summer quarter to 4.3% last quarter. Finally, the current account surplus in November of JPY 3.67 trillion was 10% wider than in November 2024 and, when seasonally adjusted, 26% greater than in October.
A 1.0% year-on-year rise of British same-store sales last month was the smallest such rise in nine months.
The Irish construction purchasing managers index slid further below the 50 neutral level into contractionary territory with a 6-month low of 48.4. But Irish retail sales grew faster in November, rising 0.5% on month, most since July.
U.S. new home sales on average were 13.4% greater in August-October than in the previous 3-month period of May-July and the most since May 2023.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: British same-store sales, Trump-Powell frictions, U.S. CPI
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