THE TAKEAWAY: USD Consumer Price Index (JAN) > 0.0% versus +0.1% expected, from 0.0% (m/m) > +1.6% as expected, from +1.7% (y/y) > Initial Jobless Claims (FEB 16) > 362K versus 355K expected, from 341K > USDJPY BEARISH

A mixed batch of minor US data this morning has the US Dollar softening intraday, although given the lack of conviction behind the reaction to the data, it’s unlikely that any material changes to US Dollar’s outlook will be made.

Price pressures were mostly steady in January, according to the Labor Department’s Consumer Price Index released today. This is not a surprise, however: the payroll tax hike at the beginning of the month, resulting from the fiscal cliff/slope deal, has dampened consumption (and thus dents aggregate demand). The flat monthly reading confirms this view; but with core pressures maintaining their relatively elevated levels (compared to the headline), it’s likely that higher energy costs in recent weeks – gasoline prices are the highest ever for the month of February – are pushing up costs at the factory gate.

Elsewhere, Initial Jobless Claims for the period of February 16 rose as well, reversing the strong reading from last week. However, this reversal is not atypical; quite frequently, claims data is better in the wake of inclement weather, due to delayed processing – the Northeast was walloped by a major blizzard at the start of the month. At their current pace, Initial Jobless Claims suggest that the February Nonfarm Payrolls reading, due out on March 8, should show that the economy added between +120K and +135K jobs.

USDJPY 1-minute Chart: February 21, 2013

USDJPY_Rebound_Stunted_by_Mixed_CPI_Figures_Soft_Initial_Jobless_Claims_body_Picture_1.png, USD/JPY Rebound Stunted by Mixed CPI Figures, Soft Initial Jobless Claims

Charts Created using Marketscope – Prepared by Christopher Vecchio

Following the release, the USDJPY slipped from 93.18 to as low as 93.04, before rebounding back to 93.09, at the time this report was written. The USDJPY has fallen sharply on the day (the Yen is the top performer), but ahead of the release, the USDJPY had rebounded off of its low just below 92.80 to as high as 93.27.

--- Written by Christopher Vecchio, Currency Analyst

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