[MARKET ANALYSIS] Aussie outpaces peers post CPI while JPY lags in continuation of recent weakness

• DXY trade flat intraday and off worst levels within a current 97.643-97.867 range after briefly dipping under yesterday's 97.695 low, with little reaction to US President Trump's State of the Union Address, where he defended his leadership and described the past year as a “turnaround for the ages”; he promoted tariffs as strengthening the US economy, and said they would “substantially replace” income taxes; he offered limited details on Iran, China and Ukraine. Aside from that, newsflow this morning has been on the lighter side.
• Macro focus today will be on NVIDIA earnings after the US close. Today’s speakers include: Fed’s Barkin (2027 voter, neutral; no text expected, but there is a Q&A) in a moderated discussion, Fed’s Schmid (2028 voter, hawk; no text expected, but there is a Q&A) on the policy outlook, Fed’s Musalem (2028 voter, hawk; no text expected, but there is a Q&A) will speak on the role of the Fed.
• JPY underperforms with recent developments seeing PM Takaichi nominating academics Ayano Sato and Toichiro Asada to the BoJ policy board, replacing Asahi Noguchi and Junko Nakagawa; analysts said the picks are viewed as reflationist and dovish, and may reduce expectations of near-term rate hikes. Further, JPY weakness coincided with reports that Japan's FTC conducted an on-site inspection of Microsoft (MSFT) on suspicion of violating the Antimonopoly Act, Nikkei reported, potentially stoking some Big Tech-related bilateral tensions. USD/JPY resides in a 155.34-156.64 range after topping Tuesday's 156.28 high.
• AUD is the G10 outperformer following firmer-than-expected monthly CPI data from Australia. The upside in consumer inflation was driven by electricity and garments & footwear offset somewhat by a larger than expected fall in holiday travel and a smaller than expected rise in health. Analysts at Westpac note "Consistent with our preliminary review we see little risk to our current inflation profile." AUD/USD resides closer to the top end of a 0.7057-0.7117 range at the time of writing.
• GBP and EUR trade with mild gains despite a flat DXY, possibly more a function of JPY weakness as GBP/JPY hovers around 211.50 and EUR/JPY meanders around 184.50. Aside from that, specifics for GBP and EUR are light, with the latter eyeing EZ final inflation metrics.

The Australian dollar (AUD) is outperforming its peers following stronger-than-expected consumer price index (CPI) data, suggesting robust inflation metrics that may support a hawkish policy stance. In contrast, the Japanese yen (JPY) lags due to dovish shifts in the Bank of Japan's policy board and ongoing speculation about economic relationships with major tech companies, indicating a continuation of recent JPY weakness. These dynamics highlight the differing economic outlooks between Australia and Japan, which could influence cross-currency trades going forward.