• China avoids deflation in 2025 as inflation edges higher, easing still likely
• ECB vice-presidential hopeful Centeno flags “structural uncertainty” facing Europe
• Goldman says NFP unlikely to shift April Fed cut unless data sharply surprises
• China curbs rare-earth exports to Japan, Tokyo raises concerns with G7 and US
• China inflation hits near three-year high, but producer deflation signals weak demand
• China December 2025 CPI +0.8% y/y (vs. 0.9% expected, prior of 0.7%)
• PBOC sets USD/ CNY reference rate for today at 7.0128 (vs. estimate at 6.9832)
• Sterling gains look premature as banks warn on UK-EU reset and weak UK growth
• Goldman sees lower but attractive 2026 equity returns: AI shift to adoption, credit capped
• Japan household spending rebounds while real wages still lag, complicates BOJ outlook
• DATA: Japan Household Spending November 2025: +2.9% y/y (vs expected -0.9%, prior -3.0%)
• Musk says China to dominate AI compute as Beijing plays down chips, touts power advantage
• Goldman survey shows investors turn sharply bearish on oil as supply glut builds
• HSBC lifts long-term gold forecasts but trims 2026 average, sees $5,000 upside risk
• investingLive Americas market wrap: Big US trade balance surprise boosts GDP estimates
• Trump proposes $200bn mortgage-bond buying plan to cut US home loan rates
• US equity close: Energy leads the way while memory chip names give back the big rally

At a glance:

• Trump floated direct MBS purchases, blurring fiscal and monetary lines

• USD firm near-term, USD/JPY pushed above 157.25

• Japan data strong on spending but real wages still falling

• China CPI improved, but deflation risks persist

• Markets cautious ahead of US NFP and tariff ruling

Late in the US afternoon, Donald Trump delivered a headline-grabbing moment, announcing he had instructed representatives to buy $200bn in mortgage-backed securities, effectively proposing a form of QE-by-presidential directive. Trump framed the move as an effort to narrow mortgage spreads and reduce borrowing costs in order to restore housing affordability.

While labelled as “QE” in market shorthand, buying MBS via government channels is more accurately fiscal policy, and the announcement reinforces expectations that policy will skew increasingly populist as the US moves deeper into the 2026 election cycle. With Trump’s approval ratings under pressure, further fiscally expansive initiatives look likely in coming months, a dynamic that should ultimately weigh on the US dollar.

But not today.

The USD remained firm, particularly against the yen, with USD/JPY pushing above 157.25. That move came despite stronger Japanese data showing household spending rose 2.9% y/y in November, far exceeding expectations, and surged 6.2% m/m. The data points to near-term resilience in consumption, though the broader picture remains fragile, with real wages still falling 2.8% y/y, continuing to erode purchasing power.

What appeared to weigh more heavily on the yen was renewed concern over China’s restriction of rare-earth and magnet exports to Japan, escalating a dispute linked to Taiwan-related comments. Japanese officials voiced strong concern and said the issue would be raised with G7 partners and US counterparts, adding a geopolitical risk premium to JPY trading.

Elsewhere, major FX pairs were relatively subdued as markets positioned cautiously ahead of US non-farm payrolls, due Friday at 13:30 GMT / 08:30 ET.

In China, inflation data showed CPI rose 0.8% y/y in December, the fastest pace since early 2023, lifting full-year (2025) inflation to 0.0% and allowing Beijing to avoid outright deflation. However, PPI fell 1.9% y/y, extending factory-gate deflation and reinforcing the view that underlying domestic demand remains weak, keeping expectations for further policy support alive.

On geopolitics, Trump told the New York Times that Taiwan is “up to” Xi Jinping, while adding he would be “very unhappy” if Beijing moved against the island, comments unlikely to calm regional nerves.

Asia-Pacific equities are mostly higher, though gains are capped as investors await US payrolls data and a looming US Supreme Court ruling on tariffs.

Asia-Pac
stocks:

• Japan
  (Nikkei 225) +1.3%
• Hong
  Kong (Hang Seng) +0.03%
• Shanghai
  Composite +0.3%
• Australia
  (S&P/ASX 200) -0.13%