Looking Ahead to Rising U.S. Tariffs, Chairman Powell’s Congressional Testimony and a Round of U.S. Price Data – Currency Thoughts
Looking Ahead to Rising U.S. Tariffs, Chairman Powell’s Congressional Testimony and a Round of U.S. Price Data
February 10, 2025
(205) President Trump will reportedly be announcing tariff hikes on multiple days this week, starting today with a likely 25% levy on all imports of steel and aluminum. Consistent with previous positive dollar reactions to threatened or actual rising tariffs, the U.S. currency appreciated overnight by 0.4% against the loonie, 0.3% relative to the Chinese yuan, Mexican peso and Japanese yen, and 0.1% versus the euro, Swiss franc, and sterling.
Federal Reserve Chairman Powell delivers semi-annual congressional testimony on monetary policy Tuesday and Wednesday, first before the Senate Banking Committee and then reprising such for the House Financial Services Committee. Formerly known as the Humphrey-Hawkins testimony, these appearances historically have on occasion been significant financial market movers. Powell is expected to say that the Fed interest rates are now a lot closer to neutrality, that the labor market is in a good place, and that the predominant monetary task of returning inflation to the 2.0% target in a sustainable way is as yet not completed. All these issues mandate that officials approach further rate-cutting with great caution, and that hawkish tone also favors the dollar.
U.S. CPI, PPI, and import price data will be reported on Wednesday, Thursday and Friday.
U.S. stock futures opened this week on a rising note. In stock markets elsewhere today, share prices close up 1.8% in Hong Kong and 1.6% in China but down 1.0% in Taiwan and 1.4% in Indonesia. European stock markets are up slightly in the euro area so far and a little more so in Great Britain.
The price of Comex gold hit a new record high intra-day level today of $2,937.70 per ounce and currently shows a 1.4% advance relative to last Friday’s close. Bitcoin (+1.2%) and oil (+1.4%) have also been quite strongly bid. In contrast, ten-year sovereign debt yields have shown little net change.
Even though a 0.7% monthly increase in Chinese consumer prices during January was the biggest rise in 11 months, the totality of Chinese price data reported today highlights a continuing struggle to avoid the kind of deflationary hole that befell Japan some two decades ago. On-year CPI inflation was just 0.5% and has now been 0.7% or lower since March 2023. Core consumer price inflation in January printed at just 0.6%, and producer prices were 2.3% below their year-earlier level.
Other price data reported today include a 2-month high in Norwegian CPI inflation of 2.3%in January; Norwegian producer price inflation of 18.1%, a 25-month high; a 4-month low in Danish CPI inflation of 1.5% last month; a 0.3 percentage point downtick in Latvian CPI inflation below December’s 16-month high of 3.3%; and a 1.5% monthly rise in Egyptian consumer prices that was associated with a 12-month 24.0% rate of increase in January.
Japan’s JPY 1.077 trillion current account surplus in December was 17.7% wider than a year earlier, contributing to a record 29.26 trillion yen surplus in full-2024 after JPY 22.59 trillion in 2023.
Japan’s economy watchers index, a measure of sentiment among service sector workers, printed at 48.6 in January, down from 49.0 in December and 49.4 in November. This was the 11th straight weaker-than-50 reading.
According to the Sentix measure, investor sentiment toward Euroland’s economy improved to a 7-month high of -12.7 in February from a recent low of -17.5 at the end of 2024.
In comparisons of December 2023 to December 2024, industrial production rose 9.0% in Sweden, 5.8% in Greece, and 1.6% in Finland but fell 9.6% in Austria and 3.9% in Bulgaria.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese CPI and PPI, Japanese current account, Norwegian CPI and PPI, upcoming Powell testimony
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