China avoids deflation in 2025 as inflation edges higher, easing still likelyECB vice-presidential hopeful Centeno flags “structural uncertainty” facing EuropeGoldman says NFP unlikely to shift April Fed cut unless data sharply surprisesChina curbs rare-earth exports to Japan, Tokyo raises concerns with G7 and USChina inflation hits near three-year high, but producer deflation signals weak demandChina 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 growthGoldman sees lower but attractive 2026 equity returns: AI shift to adoption, credit cappedJapan household spending rebounds while real wages still lag, complicates BOJ outlookDATA: 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 advantageGoldman survey shows investors turn sharply bearish on oil as supply glut buildsHSBC lifts long-term gold forecasts but trims 2026 average, sees $5,000 upside riskinvestingLive Americas market wrap: Big US trade balance surprise boosts GDP estimatesTrump proposes $200bn mortgage-bond buying plan to cut US home loan ratesUS 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%
This article was written by Eamonn Sheridan at investinglive.com.