Asia Summary and Highlights 1 Mar

Asia Session

We are seeing a back and forth action in JPY on Friday as Ueda said he need to see the outcome of wage negotiations currently taking place for confirmation of a positive wage-inflation cycle after Takata's comment on Thursday. While it seems like Ueda walked back on Takata's remark in terms of inflation dynamics, it does not change the fact that the spring wage negotiation remain the number one factor in determining the pace of changing monetary policy. We believe Ueda's remark is rather a copy-paste speech than a disagreement with monetary policy change. In fact, one of the key points Takata mentioned on Thursday, is positive signs from major companies wage hike, which should see trend inflation achieving target. USD/JPY rose on Ueda's remark to trade 0.32% higher at 150.45, almost reversing the Thursday's losses. 

China February Manufacturing PMI stays in contraction five months in a row at 49.1while CAIXIN (private) PMI beats estimate of 50.6 to be at 50.9, while official non-manufacturing PMI also beat estimate of 50.9 to arrive at 51.4. yet, the overall positive report does not entertain Chinese equities as they take a breather after Thursday's strong gain. Global equities are broadly positive and see the AUD/USD being supported to 0.6508, 0.17% higher for the session, NZD/USD also 0.06% higher at 0.6090 while USD/CAD slipped 0.05% to 1.3570 with oil gaining twenty something cents. Elsewhere, EUR/USD is up 0.06% and GBP/USD is up 0.02%.

North American session

European currencies lost ground through the North American session. EUR/USD dipped back to see lows below 1.08, dropping around 40 pips, while USD/JPY was net little changed near 150 having dropped around 80 pips to 149.20 early in the session. The USD initially fell back across the board after a modest rise in jobless claims data helped to push yields lower, but recovered by the end of the session. The jobless claims was released at the same time as a 0.4% rise in core PCE prices, which while significantly firmer than recent trend was on consensus. A 0.2% rise in personal spending was also on consensus and while a 1.0% rise in personal income was stronger than expected, disposable income was restrained to a 0.3% increase by higher tax payments.

The USD fell against the CAD from near 1.36 to below 1.3550 after modestly better than expected Canadian GDP data but corrected over half of the move late in the session. Canada’s Q4 GDP increase of 1.0% annualized was stronger than expected, and Q3 was revised up to -0.5% from -1.1%, meaning the drop has been more than fully reversed. However the details of the Q4 data fail to impress, with a decline in domestic demand and a weaker than expected unchanged outcome for December, though preliminary signals for January are positive.