Market Focus Returns to Central Bank Policies – Currency Thoughts

Market Focus Returns to Central Bank Policies

January 28, 2025

The Federal Open Market Committee’s first of eight scheduled policy reviews in 2025 begins today. Tomorrow’s second day will end with an announcement likely to be neutral in tone and devoid of any further cut in interest rates this time but dispelling of the possibility of a coming hike. Meantime, central banks in Hungary and Kyrgyzstan announced unchanged monetary policies today. Each decision was expected.

• Hungary‘s base rate of 6.5% was last cut in September. 6.5% is half of the former cyclical peak of 13%, maintained from September 2022 until an initial cut in October 2023.  CPI inflation in Hungary had fallen from 25.7% at the start of 2023 to as low as 3.0% but has backed up to a one-year high of 4.6% last month.
• Inflation in Kyrgyzstan of 6.3% in December was also at a one-year high, having dropped from 156.2% in February 2023 to 3.8% last August. The National Bank of Krygyzstan’s policy interest rate was cut in three moves between November 2022 and May 2024 by a total of 500 basis points but since has been paused at 9.0%, lowest since January 2022.

Japanese corporate service prices were unchanged on month and up 2.9% on year in December. Both changes represent 3-month lows.

British shop prices (-0.7% on year) were below year-earlier levels for a sixth straight month in January.

Malaysian producer price inflation of +0.5% was above zero percent in December for the first time since August. Likewise, PPI inflation in Singapore moved above zero percent to 1.5% last month after four straight negative readings.

French consumer confidence recovered in January to a 3-month high but, at 92, remained below its long-term average reading of 100.

Irish GDP contracted 1.3% last quarter but still recorded the biggest year-on-year growth (6.3%) in eight quarters. GDP growth of 0.3% in 2024 was up from -3.2% in 2023 but down from 12.2% in 2022. Irish retail sales rose 8.1% last month but just 0.8% compared to December 2023.

Business confidence in Australia ticked up a point to -2 in December, and the business conditions index doubled to +6.

In financial markets overnight, the dollar regained strength, advancing by 0.6% against the euro and 0.5% relative to the yen and sterling. Ten-year sovereign debt yields increased 1-3 basis points, and equity market rebounded for the most part. So did prices for bitcoin, gold and oil.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: National Bank of Hungary, National Bank of Kyrgyzstan

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on Tuesday, January 28th, 2025 at 7:56 am and is filed under New Overnight Developments Abroad – Daily Update.
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