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Morgan Stanley forecasts headline inflation to come in at 0.37% m/m and 2.7% y/y as we look to the US December CPI report later today. The former is a little hotter than the 0.3% expected estimate with headline annual inflation matching estimates and the November reading at 2.7%.

As for core inflation though, the firm forecasts that at 0.36% m/m and 2.8% y/y. That is up from the 0.08% m/m average across the past two months as well as the 2.6% y/y reading in November.

On the more bullish estimates, they cite a later survey date in November and higher inflation in bimonthly-sampled cities as being two key reasons. By their calculations, it should add around 11 bps to core inflation for the month of December.

Overall, Morgan Stanley expects the report to indicate a clear rebound in price pressures after the recent soft patch and that could potentially rebuff the narrative that disinflation has paused rather than resumed.

This article was written by Justin Low at investinglive.com.

• Takaichi administration’s responsible, proactive fiscal policy takes into account fiscal discipline
• It does not mean reckless spending
• Cannot say that fiscal policy alone is what determines market developments
• Forex rates are determined by various factors
• Long-term interest rates are also determined by various factors in the market
• Need to carefully see various factors including sustainability of wage growth to make sure Japan does not return to deflation again
• But now not in a state to declare exit from deflation just yet

The final point is an indirect jab at the Bank of Japan, with the central bank looking to raise interest rates further. And that runs against what the government wishes, amid their fiscal expansion rush. Kiuchi’s remarks above are skewed towards siding with Takaichi, as you would expect. So, there’s nothing new here besides just defending their policy path even as the yen currency comes under heavy pressure.

USD/JPY sits at 158.84 on the day now, up 0.4%, as it runs up to test one-year highs. Danger, danger. The closer and quicker the pair runs up towards the 160.00 threshold, the more it is going to invite intervention talk.

This article was written by Justin Low at investinglive.com.

It is reported that she has conveyed to a ruling party executive of her intention to dissolve parliament’s lower house, which could set up for a snap election in either early or the middle of February. The next ordinary Diet session is scheduled for 23 January and that is the timing in which Takaichi is reported to be making this call.

For some context, it is standard convention for Japan’s policymakers to convene for the ordinary Diet session in January since 1992. However, it would mark the first time since then that the lower house is dissolved at the very start of the calendar year.

It’s never been the case as most of the time, policymakers would choose to focus more on trying to get the budget passed for the coming fiscal year by the end of March. And a change in the lower house could delay some proposals and measures in that regard.

So, why is Takaichi planning this move here?

It’s mostly to shore up support and increase the number of ruling coalition seats while her support ratings remain high. All that of course before opposition lawmakers start piling on the questions on her policy setting when the Diet session begins. And the ongoing feud between Japan and China won’t make things easy for her, as it offers up free ammunition for other lawmakers to question her leadership.

It wouldn’t be the first time a Japanese prime minister would go to such lengths to avoid scrutiny and questioning at his/her own convenience. Takaichi would be taking another leaf out of Shinzo Abe’s book, in which the latter dissolved the lower house back in 2017 to avoid being questioned in the Diet about scandals involving Moritomo Gakuen and Kake Educational Institution.

If she does indeed dissolve the lower house, a snap election could be called on 8 February or 15 February next month. So, just be mindful of those dates.

This article was written by Justin Low at investinglive.com.

• USD/JPY is surging still. Do we pencil in January 19 for Bank of Japan intervention?
• Japan steps up FX warnings, Tokyo jawboning returns, but yen reaction limited
• Japan govmt spokesperson says ready to respond on sharp, one-sided yen weakness
• Oil rises as geopolitics clash with new supply; Iran tensions vs. Venezuela exports
• Nikkei hits record as weak yen and election speculation fuel rally
• PBOC sets USD/ CNY central rate at 7.0103 (vs. estimate at 6.9734)
• Fed’s Williams sees no urgency to change rates, policy well placed
• US convenes allies to strengthen critical minerals supply chains
• Bank of Korea seen holding rates as next cut delayed to 2027 (poll)
• UK consumer spending slumps in December as household caution deepens
• Fed Williams continues to discover multiple ways to say no rate cut this month, clever boy
• Australian consumer confidence slips, 92.9 (94.5 prior), as rate expectations turn higher
• Japan’s Katayama warns on weak yen in talks with US Treasury, invokes Bessent’s name
• Fed’s Williams defends Powell, warns against eroding central bank independence
• Fed’s Williams says policy near neutral, sees inflation back at 2% in 2027
• Trump threatens 25% tariff on countries doing business with Iran. No detail, just bluster.
• Fitch warns Fed independence is key pillar of U.S. sovereign credit rating
• investingLive Americas FX news wrap: US equities shrug off Trump Fed independence attack
• Trump: Countries doing business with Iran to pay 25% US tariff
• S&P and Dow close at new record levels
• New Zealand business confidence surges to decade high as recovery gathers pace
• New Zealand data: Q4 2025 business confidence 48% vs. +18% in the prior quarter

Summary:

• NZ business confidence jumps to highest since 2014

• Fitch flags Fed independence as key US rating support

• Trump tariff threat on Iran-linked trade adds uncertainty

• Williams signals Fed patience, defends policy framework

• Yen resumes slide; crosses hit fresh record highs

Asia opened to a mixed macro backdrop, with pockets of optimism offset by persistent FX stress and rising geopolitical uncertainty.

In New Zealand, sentiment improved sharply after the New Zealand Institute of Economic Research reported business confidence at its highest level since 2014. The QSBO showed hiring and investment intentions lifting, activity stabilising and inflation pressures remaining contained, reinforcing expectations that the Reserve Bank of New Zealand is done cutting rates this cycle. NZD/USD ticked modestly higher on the release.

In the US, institutional risk remained in focus. Fitch Ratings said Federal Reserve independence remains a key support for the US AA+ sovereign rating, warning it is monitoring governance and institutional checks closely following renewed political pressure on Chair Jerome Powell.

Policy uncertainty was amplified after Donald Trump said the US would impose a 25% tariff on any country doing business with Iran, effective immediately. The White House provided no implementation detail, leaving markets to assess (guess?) the implications for global trade and Iran’s major partners. Market speculation if intensely focused on how, if?, this applies to China, one of Iran’s largest trading partners. Its hard not to see a TACO on this, at least as it applies to China.

Fed messaging itself remained steady. New York Fed President John Williams said policy is near neutral and well positioned, with inflation expected to return to 2% in 2027 and no urgency to cut rates further. Williams defended Fed independence, the current rate-control framework, and reiterated that the dollar remains the world’s reserve currency.

FX markets were dominated by renewed yen weakness. Japan Finance Minister Satsuki Katayama said she raised concerns about one-sided yen moves with US Treasury Secretary Scott Bessent, briefly lifting the currency. The bounce faded quickly. USD/JPY pushed on to a one-year high near 158.25, and then accelerated further. Cross-yen pairs marked a series of fresh extremes: GBP/JPY hit its highest level since 2008 near 213.20, EUR/JPY rose to a record 185.02, and CHF/JPY to a record 198.90. Japanese equities continued to thrive on the weak yen, with the Nikkei 225 surging to a historic high.

In the UK, demand signals softened further. Barclays card data showed consumer spending fell 1.7% y/y in December, the sharpest drop since 2021, while British Retail Consortium data showed retail sales growth slowed for a fourth straight month as shoppers waited for post-Christmas discounts.

Overall, the session highlighted a familiar pattern: resilient risk assets, firm USD support, and a yen under sustained pressure despite repeated official warnings.

Asia-Pac
stocks:

• Japan
  (Nikkei 225) +3.08%, loving yen weakness and the prospect of more government fiscal stimmy
• Hong
  Kong (Hang Seng) +1.12%
• Shanghai
  Composite flat
• Australia
  (S&P/ASX 200) +0.94%

Authorities watching JPY crosses:

This article was written by Eamonn Sheridan at investinglive.com.

Summary:

• UK consumer spending fell sharply in December

• Barclays card data shows biggest drop since 2021

• Retail sales growth slows to weakest pace since May

• Shoppers delayed purchases awaiting discounts

• Outlook hinges on inflation easing and BoE cuts

UK consumers pulled back sharply on spending in December, adding to signs that household caution intensified into year-end as worries over taxes, inflation and the economic outlook weighed on sentiment.

Debit and credit card data from Barclays showed overall consumer spending fell 1.7% year on year in December, a deeper contraction than November’s 1.1% decline and the largest drop since February 2021, during the COVID pandemic. Spending on essential items declined for an eighth consecutive month, underlining persistent pressure on household budgets.

Separate figures from the British Retail Consortium painted a similarly subdued picture. Total retail sales rose just 1.2% y/y in December, down from 1.4% in November and marking the weakest growth since May. Like-for-like sales increased only 1.0%, also the softest pace in seven months, as shoppers delayed purchases in anticipation of post-Christmas discounts.

Barclays said consumer caution was exacerbated by concerns over potential tax rises flagged in the recent budget by UK finance minister Rachel Reeves, alongside lingering inflation anxiety and a slowing economy. More than half of consumers surveyed said they plan to cut spending on food and discretionary items in 2026.

Retail detail highlighted a widening split. Food sales rose 3.1% year on year, but the BRC said this increase was largely driven by higher prices rather than volumes. Non-food sales were almost flat, with fewer Christmas gifts sold than expected, reinforcing evidence of weak discretionary demand. Major retailers, including Sainsbury’s, have already flagged soft non-food performance over the holiday period.

Despite the bleak December data, Barclays said there are tentative reasons for optimism. Chief UK economist Jack Meaning said inflation is expected to ease significantly in the first half of 2026, and further interest-rate cuts from the Bank of England could eventually restore real spending power.

For now, however, the data suggest UK consumers ended 2025 “with a whimper,” leaving growth momentum fragile heading into the new year.

This article was written by Eamonn Sheridan at investinglive.com.

Summary:

• Consumer sentiment slips further into pessimistic territory

• Rate expectations jump, weighing on confidence

• Near-term economic outlook deteriorates most sharply

• Job confidence softens, housing sentiment steadier

• Mixed backdrop for upcoming RBA decision

Australian consumer confidence slipped further into pessimistic territory at the start of 2026, with the latest Westpac–Melbourne Institute survey showing households growing more cautious about the year ahead as interest-rate expectations shift higher.

The headline Consumer Sentiment Index fell 1.7% to 92.9 in January, following a sharp 9% decline in December. While confidence remains well above the extreme lows seen during the 2022–2024 cost-of-living crisis, the reading below 100 indicates pessimists continue to outnumber optimists.

Westpac economist Matthew Hassan said households are becoming increasingly concerned about what 2026 may bring for family finances and the broader economy. A key driver remains a sharp turnaround in interest-rate expectations, with nearly two-thirds of consumers now expecting mortgage rates to rise over the next year, more than double the proportion recorded in September.

The deterioration in January was concentrated in near-term expectations. Sub-indexes tracking family finances over the next year and the economic outlook over the coming 12 months fell 4.5% and 6.5% respectively. Consumers also became less confident about job prospects, reinforcing signs that labour-market optimism is cooling after a period of resilience.

These declines were partially offset by modest improvements elsewhere. Assessments of family finances compared with a year ago rose 2.3%, while longer-term economic expectations and views on whether now is a good time to buy major household items edged higher. Housing-related sentiment was comparatively resilient, with younger consumers remaining positive on buying conditions despite a slight cooling in house price expectations.

For policymakers, the survey presents a mixed backdrop ahead of the Reserve Bank of Australia’s next meeting, February 2 and 3. Softer consumer confidence and easing demand indicators support the case for patience, even as households increasingly brace for higher borrowing costs. With CPI data set to be a key focus in coming weeks, the RBA is likely to weigh signs of moderating demand against still-elevated inflation risks before adjusting its policy stance.

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RBA dates this year:

This article was written by Eamonn Sheridan at investinglive.com.

Summary:

• Trump announces 25% tariff on countries trading with Iran

• Measure declared effective immediately, with no details provided

• China, UAE, India and Turkey among Iran’s key partners

• Raises risk of higher costs for Chinese goods entering US

• Adds fresh uncertainty to global trade and geopolitics

Trump unveiled a sweeping 25% tariff threat on countries trading with Iran, injecting new uncertainty into global trade and geopolitics.

U.S. President Donald Trump on Monday announced a sweeping new trade measure targeting countries that do business with Iran, declaring that any such nation will face a 25% tariff on all trade with the United States, effective immediately.

In a post on his Truth Social platform, Trump said the tariff would apply to “any Country doing business with the Islamic Republic of Iran,” adding that the order was “final and conclusive.” The announcement comes as Iran faces its third consecutive week of anti-government protests, raising the prospect that Washington is using trade policy to intensify economic pressure on Tehran indirectly by targeting its commercial partners.

The White House declined to provide further details on how the tariff would be implemented, including how the administration defines “doing business” with Iran or whether exemptions, thresholds, or phased enforcement could apply. The lack of clarity has left markets and trade partners assessing the scope and enforceability of the move.

Iran’s major trading partners include China, the United Arab Emirates, India, and Turkey. Among those, China is also one of the United States’ largest trading partners, raising the possibility that the new tariff could significantly raise the cost of Chinese imports into the U.S. if applied broadly.

The announcement adds a new layer of uncertainty to global trade flows and comes at a time when markets are already sensitive to geopolitical risk and the potential use of tariffs as a policy tool. Trump has previously signalled a willingness to deploy trade measures aggressively, both for national security objectives and as leverage in broader diplomatic disputes.

Without formal guidance from the administration, analysts said the immediate market impact may be muted, but warned that any follow-through or clarification could have material implications for global supply chains, U.S.–China trade relations, and risk sentiment more broadly.

—-

China is a big importer of oil from Iran.

This article was written by Eamonn Sheridan at investinglive.com.

• Gold and silver surge as Fed uncertainty ignites safe-haven demand
• US Treas Sec Bessent: Federal investigation made a mess, and could be bad for markets
• EURUSD Technical Analysis: Key moving averages define the next breakout
• U.S. Treasury auctions off $39 billion of 10 year notes at a high yield of 4.173%
• U.S. Treasury will auction $39 billion of 10 year notes at the top of the hour
• Silver Technical Analysis Today: The Rocket May Be Fatigued Now
• Google hits $4 trillion in market cap on partnership deal to power Apple AI features
• Consumer defensive gains: Walmart and defense stocks lead the charge
• US stocks open lower on renewed attack against Fed independence

At a glance:

• US stocks closed at record highs despite Washington noise

• Tech and consumer staples led; Walmart jump boosted Nasdaq

• Financials lagged after Trump floated credit-card rate cap

• Dollar slipped on renewed Fed-independence concerns

• Gold hit fresh record highs

US equity markets shrugged off a fresh Washington shock on Monday, January 12, finishing with new record closes for the S&P 500 and Dow even as FX traders used the moment to pressure the dollar and rotate toward havens.

Equities: After opening softer on headlines around Federal Reserve Chair Jerome Powell, U.S. stocks found their footing and ground higher into the close. The Dow added 0.17%, the S&P 500 rose 0.16%, and the Nasdaq gained 0.26%, with leadership coming from tech and consumer staples. Walmart jumped around 3% and helped lift the broader tape, with investors also eyeing the stock’s upcoming inclusion in the Nasdaq-100 (effective January 20), which could drive incremental passive inflows. The main pocket of weakness was financials, which lagged after President Donald Trump called for a one-year cap on credit-card rates at 10%. Bank and consumer-finance names were hit hardest, and the sector finished as the key drag even as the major indices printed fresh highs.

FX: The U.S. dollar weakened in Asia and struggled mainly sideways in US trade as the DOJ action against Powell revived concerns over Fed independence and the longer-run policy outlook. The dollar index fell, with the euro up near $1.17 before dripping lower. One notable exception was USD/JPY, which stayed bid around 158.1, with the yen pressured by recent Japan wage data and a narrative that the Bank of Japan’s tightening path may be pushed out. As I update USD/JPY has dipped back under 158.00. Macro attention now swings quickly to Tuesday’s U.S. CPI, a key input into whether the market’s next-cut timing (increasingly centred on mid-year) shifts again.

Gold: In commodities, the session’s clearest “message trade” was in precious metals, where gold surged to fresh record highs above $4,600/oz as investors reached for classic havens amid political and geopolitical uncertainty.

This article was written by Eamonn Sheridan at investinglive.com.

Trump: Effective immediately, any country doing business with Islamic Republic of Iran will pay a tariff of 25% on any and all business being done with United States of America

Just the headline at this stage, I’ll post more detail separately.

This article was written by Eamonn Sheridan at investinglive.com.

This is just a data post, I’ll have the details in a separate post.

This article was written by Eamonn Sheridan at investinglive.com.

Summary:

• Business confidence jumps to highest level since 2014

• Firms’ own activity stabilises as recovery takes shape

• Hiring and investment intentions turn decisively positive

• Manufacturing leads rebound; construction remains weakest

• Inflation pressures contained despite improving demand

Business confidence in New Zealand has jumped to its strongest level in more than a decade, according to the latest Quarterly Survey of Business Opinion (QSBO) from New Zealand Institute of Economic Research, adding to evidence that the economy is emerging from a prolonged slowdown as lower interest rates begin to flow through.

The survey showed a net 39% of firms expect general economic conditions to improve in the coming months, up sharply from a net 17% in the September quarter. That marks the highest level of confidence since March 2014 and a decisive turnaround after an extended period of pessimism.

Firms’ own trading activity has also stabilised, with only a net 3% reporting a decline in activity in the December quarter. While the gap between confidence and realised activity persists, NZIER said the results suggest an economic recovery is starting to take shape.

Improved sentiment is translating into stronger intentions. A net 22% of firms plan to increase staff numbers in the next quarter, while investment plans for buildings and plant have turned positive after being negative in the September quarter. There are also early signs spare capacity is beginning to shrink, with a small increase in firms reporting difficulty finding skilled labour.

The lift in confidence was broad-based. Manufacturing is now the most optimistic sector, supported by stronger domestic and export demand. Retail and services sentiment also improved, although profitability remains under pressure. Construction continues to lag, with weak demand, declining profitability, and ongoing price cuts keeping cost pressures subdued.

Overall, cost and pricing indicators suggest inflation pressures remain contained. With demand improving but spare capacity still evident, NZIER expects no further OCR cuts, forecasting the policy rate to trough at 2.25% before the Reserve Bank of New Zealand begins tightening in the second half of 2026.

—

The NZ QSBO is a widely watched indicator of New Zealand’s economic health:

• it provides insight into the views of businesses on the current state of the economy and expectations for the future
• the survey has been running since 1961

Key indicators from the survey include:

• Business Confidence, measuring overall sentiment in the business community about the state of the economy. It can be an important leading indicator of economic activity, as positive business confidence can lead to increased investment and hiring, while negative confidence can have the opposite effect.
• Own Activity Outlook, which assesses firms’ expectations of their own trading activity in the next three months. It’s considered one of the more reliable indicators of future GDP growth.
• Employment and Investment Intentions indications are used to show whether businesses plan to increase or decrease investment in capital and hiring. This can be a good indicator of future employment and investment activity.
• Capacity Utilization measures how much of their potential output firms are currently producing. High capacity utilization can indicate strong demand and potential inflationary pressure.
• Cost and Price Indicators are used a gauge of inflation pressures. These measure firms’ expectations of changes in costs and prices, which can be an indicator of future inflation.

This article was written by Eamonn Sheridan at investinglive.com.

Axios is reporting that Treasury Secretary Scott Bessent privately warned President Trump that the federal investigation into Fed Chair Jerome Powell had “made a mess” and risked destabilizing financial markets. According to the report, Bessent did not challenge the need for a full investigation, but he made clear that the timing and political optics were dangerous—especially for markets that depend on the Federal Reserve’s independence and credibility.

Bessent’s concern, according to Axios, was rooted in expectations around leadership transition. The assumption had been that once President Trump named a new Fed chair, Powell would step aside in an orderly fashion. Instead, the investigation changed that dynamic. Rather than leaving quietly, Powell now appears more likely to dig in, creating a protracted and politically charged standoff that adds yet another layer of uncertainty for investors. That shift, Bessent reportedly warned, “made a mess” of what should have been a clean handoff.

On Sunday night, President Trump denied having any knowledge of a Justice Department investigation, telling reporters:

“I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings.”

Powell, in response, struck a defiant but measured tone, saying:

“No one — certainly not the chair of the Federal Reserve — is above the law, but this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”

Markets initially reacted with caution. Stocks dipped on the headline, as investors briefly priced in the risk that political pressure on the Fed could undermine monetary policy independence and complicate rate-setting at a critical time for the economy. However, that weakness was quickly bought.

By mid-session, the NASDAQ had rebounded sharply and was trading near record highs, up 122 points, or 0.51%, at 23,791.85. The index reached a session high of 23,800.52, putting it within striking distance of its all-time high at 23,958.47. Earlier in the day, the NASDAQ had fallen as low as 23,562.97, down 108 points, showing just how quickly sentiment flipped once dip buyers stepped in.

The S&P 500 also erased its early losses, climbing 16.50 points, or 0.24%, to 6,982.66. The index had traded as low as 6,934.07, down 32.21 points at its worst levels, before recovering alongside the tech-led rally. The S&P is on pace for a record close today.

The market’s message is clear: while political risk around the Fed remains a concern, investors are still willing to buy weakness as long as liquidity, earnings, and growth trends remain intact. For now, stocks are choosing to look past the noise — but if tension between the White House and the Fed remains, the story may not be over as investors worry about the political implications

This article was written by Greg Michalowski at investinglive.com.