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November's CPI data "dives". How strong a hawkish attack will the Bank of Japan unleash today?
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market www.xmtraders.commentary]: November CPI data "dived", how strong a hawkish impact will the Bank of Japan release today?". Hope this helps you! Original content is as follows:
In early trading in Asia on Friday, December 19, spot gold was trading around US$4,336 per ounce. The price of gold fell slightly on Thursday. Lower-than-expected US inflation data weakened the appeal of gold as a hedge against inflation. However, the support brought by rising unemployment during the same period limited the decline in gold prices; US crude oil was trading around US$56 per barrel, and the market was weighing the increasing supply-side risks arising from the Russia-Ukraine peace talks and the situation in Venezuela.
The U.S. dollar weakened against the Japanese yen and Swiss franc on Thursday, mainly due to lower-than-expected U.S. inflation data for November, reducing the appeal of the U.S. dollar; at the same time, the euro fell slightly after the European Central Bank kept interest rates unchanged.
Specific data shows that the U.S. consumer price index rose 2.7% year-on-year in November, lower than the 3.1% expected by the survey. This caused the USD/JPY to fall 0.12% to 155.50 yen; the USD/CHF fell 0.14%. The analysis pointed out that since the previous long-term government shutdown affected data collection, the accuracy of this inflation report is questionable, and the market is paying close attention to the more traditional PCE price index.
On the other hand, the euro fell 0.14% against the dollar to $1.17240. The European Central Bank decided to keep interest rates unchanged at the meeting that day and took a positive view on the resilience of the euro zone economy, but it did not change market expectations that interest rates would remain unchanged in the next two years.
The pound rose slightly by 0.09%** after the Bank of England announced its fourth interest rate cut this year. The market expects that the time for the next interest rate cut has been postponed. The Bank of Japan is almost certain to raise interest rates on Friday from 0.5% to 0.75%.
Asian Market
According to the latest data released by the Statistics Bureau of Japan on Friday, Japan’s national consumer price index (CPI) rose by 2.9% year-on-year in November, an increase from the previous 3.0%.
Further details showed that the national consumer price index (excluding fresh food) increased by 3.0% year-on-year in November, www.xmtraders.compared with 3.0% previously. This figure is in line with market consensus.
The CPI excluding fresh food and energy index rose by 3.0% year-on-year in November, higher than the previous 3.1%.
European market
The European Central Bank maintained the deposit interest rate at 2.00%, in line with expectations, showing confidence that the current policy settings are still applicable. With inflation broadly on target and growth improving, policymakers do not see the need to adjust interest rates at this stage.
The updated Eurosystem staff forecast shows that headline inflation will average 2.1% in 2025, falling to 1.9% in 2026, 1.8% in 2027, and falling back to 2.0% in 2028. Core inflation excluding energy and food is expected to be 2.4% in 2025, 2.2% in 2026, 1.9% in 2027, and 2.0% in 2028.
The upward revision of the inflation outlook for 2026 mainly reflects the expectation that service sector inflation will decline more slowly than previously expected.
On the growth front, forecasts are revised upward over the forecast period. GDP is expected to grow by 1.4% in 2025, 1.2% in 2026, 1.4% in 2027, and remain at 1.4% in 2028. This improvement was mainly driven by stronger domestic demand.
The Bank of England announced a widely expected 25 basis point interest rate cut, raising the Bank Rate to 3.75%. However, the decision came with an unexpected hawkish 5-4 vote split.
Supporters of the cuts, led by Governor Andrew Bailey (along with Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor), argue that inflation relief is still largely a work in progress. Some members stressed that "upside risks to inflation continue to decline." Other views focused on weaker activity and downside risks to inflation.
In contrast, four MPs (Meghan Green, Claire Lombardelli, Katherine L. Mann and Hugh Peel) voted to keep interest rates steady, expressing "continued concerns about inflation." They highlighted rising services sector inflation, wage growth and inflation expectations. These members "are not convinced that the stance of monetary policy is substantively restrictive" and primarily called for a more "long-term period of policy restraint."
U.S. market
In the week ending December 13, the number of initial unemployment claims in the United States fell by 13,000 to 224,000, in line with expectations. The four-week moving average number of initial applicants rose by 500,000 to 217,500.
In the week ending December 6, the number of continuing applicants increased by 67,000 to 1.897 million. Four-week moving average of continuous applicationdropped by 14,000 to 1902.
U.S. inflation slowed more than expected in November, with the data www.xmtraders.compared with September levels due to a lack of October data following the government shutdown.
The overall CPI fell from 3.0% to 2.7% year-on-year, which was lower than the expected recovery and reached 3.1%. Core CPI also unexpectedly fell, falling from 3.0% to 2.6%, well below expectations of 3.0%.
This broad slowdown reinforces the view that underlying inflationary pressures are easing sooner than previously expected. Among various items, energy prices increased by 4.2% year-on-year, and food prices increased by 2.6% year-on-year.
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