Asia Summary and Highlights 7 May

Asia Session

RBA has left cash rate unchanged at 4.35% align with our forecast on Australian inflation dynamics. Despite the slower than expected moderation in CPI, the room for further tightening is small if considering the health Australian economy, even when the RBA leaves the door open to policy changes. There is no big changes in the statement with forward guidance "The path of interest rates that will best ensure that inflation returns to target in a reasonable time frame remains uncertain and the Board is not ruling anything in or out. The Board will rely upon the data and the evolving assessment of risks." is a new set of wordings but not signalling anything new. In the press conference, Bullock suggest further tightening is not ruled out but not of central forecast. AUD/USD slipped by 0.55% to 0.6589. The Australian Q1 Retail sales has come in lower at -0.4% q/q vs. -0.2% expected. It confirms the strength in domestic demand has began to weaken after prolonged period of high rates and depletion of household saving. It should keep the RBA on hold in the coming meeting as the cooler economy and still hot inflation does not allow RBA to change policy rate. NZD/USD is also 0.12 % to 0.6003 while USD/CAD rose 0.17%.

USD/JPY continue its grind higher after market sentiment being affected by the lack of co-ordination in intervention between the U.S. and Japan. Both Hayashi and Kanda said they have no comment towards intervention. JGB yields reopened lower after Monday's Japan holiday. U.S. Treasury yields are also a tad lower for the session. USD/JPY is up 0.44% at 154.54. Else, EUR/USD is down 0.1% and GBP/USD is down 0.2%.

North American session

The USD saw some early slippage in North America, but this subsequently faded. After a brief dip below 153.50 USD/JPY recovered to touch 154. EUR/USD advanced to 1.0790 before slipping back to 1.0770, and European slippage in EUR/GBP was largely reversed. Risk-sensitive currencies saw a marginal late dip when Israel stated Hamas’ acceptance of a cease fire proposal was not sufficient, but generally held firm.

Comments from Fed’s Barkin and Williams gave little away on the rates outlook. The Fed’s Senior Loan Officer Opinion Survey was little changed from the previous quarter, maintaining a generally resilient tone, and had little impact.