Some Reprieve in the Panic But Uneasiness Lingers – Currency Thoughts
Some Reprieve in the Panic But Uneasiness Lingers
March 12, 2025
U.S. stock futures were up 0.5-1.0% about an hour before the release of U.S. consumer price figures. In currency trading, the dollar rose 0.6% against the yen despite Bank of Japan Governor Ueda dispelling any notion of imminent direct intervention. He said recent yen appreciation was grounded in fundamental economic trends. Alternatively, the dollar fell 0.2% against the Canadian dollar and 0.1% relative to the Swiss franc and Mexican peso. Ten-year sovereign debt yields climbed overnight by three basis points in Germany and Great Britain, and a basis point in the United States, France, Italy and Spain. West Texas Intermediate oil strengthened 1.0%, helped by word that Ukraine supports a U.S.-proposed 30-day ceasefire, but there’s been no word whether Russian President Putin will agree to the deal. Bitcoin’s price slid 0.6%, and gold is steady.
Other stock markets around the world show a diversity of directions. Those in Australia and New Zealand lost 1.3% this Wednesday, and Hong Kong fell 0.8%. But Indonesia and Taiwan saw decent gains, and markets in Germany, France and Italy are each up more than 1.0%.
More flip-flops have occurred on the U.S. policy front. Military aid and intelligence support for Ukraine has been restored. Some tariff hikes have been suspended temporarily, and others have been added. Investors have been discouraged from reading too much into moves in the stock market, and President Trump conspicuously declined to rule out the possibility of a shallow recession that would be followed by enduring growth.
European Central Bank President Lagarde gave a speech that stressed the importance of anchoring inflation expectations. While no guarantee can be made that inflation will be at 2.0% all the time, there must be complete clarity surrounding the commitment to set policy in such a way that promotes inflation convergence on that target.
The consensus of analysts is that U.S. CPI figures due at 08:30 EDT (12:30 GMT) will reveal modest downticks in inflation to 2.9% overall and 3.2% core. Other price data released today include
- Lower Serbian consumer price inflation of 4.5% last month after January’s 8-month high of 4.6%.
- Much lower-than-projected Indian February CPI inflation of 3.62% (a 7-month low) versus 4.26% in January and 6.2% last October.
- A 4-month low in Portuguese CPI inflation of 2.4% last month. Inflation previously fell from 10.1% in September 2022 to 1.9% in August 2024.
- Japanese domestic producer prices were unchanged on month in February but at a 2-month low on a year-on-year basis at 4.0%. Import prices tumbled 1.7% on month, reflecting a strong yen, and were also 0.7% below their year-earlier level.
- Producer prices in Lithuania were 0.7% below their year-earlier level in February.
The National Bank of Georgia’s policy interest rate was left steady after today’s review at 8.0%, its level since a 25-basis point cut in May 2024 but also aligned with the pandemic low that had been maintained from August 2020 until a hike in March 2021. A subsequent peak of 11.0% prevailed from April 2022 until an initial cut in May 2023. Georgian CPI inflation of 2.4% overall and 2.1% core last month remained below the central bank target of 3.0% but was above a low of 0.9% in August 2024. Like so many other central banks, officials are taking a cautious route to extending rate reductions in light of many global uncertainties.
The Central Bank of Azerbaijan’s refinancing rate was likewise kept unchanged at 7.25%. It’s been 7.25% since a 25-basis point cut in March 2024, which was the fifth reduction since November 2023. The rate had crested in June 2023 at 9.0%. After peaking at 15.6% in October 2022, Azerbaijani CPI inflation subsided all the way to zero percent by April 2024 but has accelerated to 5.4% as of this past January. That’s close to the central bank target range ceiling of 6.0% and well above the target midpoint of 4%.
U.S. consumer price inflation subsided more than forecast last month to a 3-month low on the total index of 2.8% and to a 46-month low of 3.1% when excluding food and energy. The closely watched index for shelter costs slowed to a 4.2% pace from 4.1%, and the energy component swung from 1.0% year-on-year in January to -0.2% last month. Food price inflation ticked 0.1 percentage point higher to 2.6%. Starving for a piece of favorable inflation news, investors drove U.S. share price futures noticeably higher after the data got released.
U.S. mortgage applications jumped 11.2% last week on top of the prior week’s 20.4% leap. A 30-year fixed mortgage rate of 6.67% was its lowest in 20 weeks and down from 7.09% in early January.
Interest rate decisions are due later today from central banks in Canada and Poland.
Brazilian CPI inflation rose a half percentage point to a 17-month high in February of 5.06%, having previously slowed from 12.1% in April 2022 to 3.7% by April 2024.
A quarterly survey by Japan’s Ministry of Finance of business confidence revealed weakening sentiment among all participating large companies, including a shift in the sub-index for manufacturers to a reading of -2.4 from +6.3 in the last 2024 survey. Sentiment became less optimistic among larger non-manufacturers.
Indian industrial production posted a bigger 5.0% year-on-year rise in January than the 3.2% increase in December. November’s increase had also been 5.0%.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Azerbaijan, Japanese PPI and import prices, National Bank of Georgia, U.S. consumer prices
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