Image Source: Pixabay
 Asian markets tracked Wall Street’s gains, driven by a dip in US core inflation that kept hopes of a Federal Reserve rate cut this year alive. Positive sentiment was also fuelled by robust earnings from U.S. banks such as Goldman Sachs, JPMorgan Chase, Wells Fargo, and Citigroup. Wall Street executives expressed confidence that the new U.S. administration would be favourable for business and beneficial for banks. Bank of America and Morgan Stanley are set to announce their results on Thursday.The yen strengthened amid expectations of a potential Bank of Japan (BoJ) rate hike. Markets in Australia, Hong Kong, and South Korea advanced, pushing the Asian stocks index higher for a third consecutive day. The S&P 500 climbed 1.8% on Wednesday, its best performance since the November election, rebounding from its earlier 2025 decline. The yen surged following reports suggesting that BoJ officials are leaning toward raising interest rates next week, assuming no major disruptions from Trump’s policies. Treasury yields stayed steady, while the Dollar index ended its two-day losing streak. In commodities, oil prices rose sharply as continued declines in US crude inventories, the longest since 2021, fuelled concerns over global supply shortages. The South Korean won weakened after central bank Governor Chang-Yong revealed that all six board members were open to considering a rate cut within the next three months. Investors are closely watching developments in the Middle East as Israel intensified its attacks on Gaza shortly after a ceasefire and hostage release agreement was reached, aiming to end the conflict that began 15 months ago.The December US CPI report was somewhat encouraging, with headline year-over-year inflation rising by 0.4% month-over-month to 2.9% from 2.7%, largely due to energy base effects. However, there was a slight improvement in core CPI, which fell to 3.2% from 3.3% after a 0.2% month-over-month increase (median expected was 0.3%). This was supported by a further slowdown in shelter costs, with the year-over-year rate decreasing to 4.6% from 4.7%. This has been the primary factor contributing to the relatively high CPI compared to PCE, indicating that this improvement may not necessarily lead to a lower PCE figure. It is noteworthy that the upward trend in goods prices, driven by strong demand. This should be reflected in Thursday’s retail sales report. Additionally, a rise in December auto sales, but even excluding that effect, underlying sales are expected to remain solid, with growth in the Control Group anticipated to be 0.4% month-over-month, translating to a year-over-year growth rate of 3.7%. This pace aligns with the ongoing strength in the services sector. In conclusion, the dovish interpretation of CPI may be short-lived, with focus more on demand-side indicators. This is crucial for the Fed considering the growth conditions and perceived inflation risks, including the effects of tariffs.UK growth for November was reported at +0.1% m/m by the ONS, but it was close to zero as the index level remained unchanged from October. December growth needs to be around 0.25% m/m for Q4 GDP to be flat, aligning with the MPC’s downwardly revised expectations. The November figure was 0.1ppts below market consensus, largely due to a 0.4% m/m contraction in industrial production, while the services sector grew by 0.1% m/m. Over three months, the services sector showed 0.0% growth, with health being the best-performing sub-sector due to the absence of doctors’ strikes. Overall, GDP is slightly lower than in March, and recent employment indicators do not suggest improvement, likely leading MPC member Taylor to maintain a dovish stance on the rate outlook. Key events on today’s calendar include: BoE credit conditions, US retail sales, the Philly Fed report, initial jobless claims (IJC), NAHB housing market index, industrial production, housing starts, German CPI, euro area trade data, and the release of ECB minutes.
 Overnight Newswire Updates of Note

          (Sourced from reliable financial news outlets)
 FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

CFTC Data As Of 10/1/25

Technical & Trade ViewsSP500 Short Against 6040

EURUSD Short Against 1.0435

GBPUSD Short Against 1.2614

USDJPY Long Against 153.77

XAUUSD Short Against 2692

BTCUSD Short Against 101,960

More By This Author:Daily Market Outlook – Wednesday, Jan. 15
FTSE Earnings Disappointment Sees UK Benchmark Underperform Peers
FTSE A Shaky Start To The Week As Yields Continue To Weigh On Risk Sentiment