Asia Summary and Highlights 26 August
USD opened lower as Asia market digest Powell's take on September rate cut
Asia Session
With Powell open to the idea of a 50bps rate cut in September on Friday night, the USD is in free fall along with U.S. Treasury Yields across the curve. Asian market participants agreed with the previous momentum and see more follow through USD selling at the opening on Monday. Majors opened not in favor of USD with USD/JPY leading the fall. USD/JPY opened 15 pips lower at 144.18. As session progress, we see USD faring a tad better as it trades higher against major except JPY. U.S. Treasury yields have yet to close the opening gap warns caution for USD longs later in London/New York session. USD/JPY has rebounded from session low at 143.45 to trade 0.26% currently at 143.98.
There has been no progress for Gaza peace talk over the weekend and Israel and Hezbollah has been exchanging rockets. Both sides seems to have back down for now as both parties suggest the attack is over for now. However, it does not seem to calm markets with such prolonged geopolitical tension. The antipodeans are falling on along mixed risk sentiment and see AUD/USD, NZD/USD down 0.30% to 0.6776and 0.6215 respectively while USD/CAD rose 0.05%. Else, EUR/USD is down 0.05% and GBP/USD down 0.12%.
North America Session
The USD fell noticeably across the board in North America after Fed chair Powell signalled a September rate cut and did not rule out 50bps rather than 25bps. U.S. bond yields fell. The sense is that the Fed could act quicker than other G10 central banks in the coming months, which can persistently hurt USD sentiment. Thus though the ECB is widely expected to cut in September, the next move is not expected until December and this has helped EUR sentiment versus the USD. Focus into next week is whether USD/JPY builds further momentum towards 142.
BOE Bailey key quotes in Jackson Hole were that it is too early to declare victory against inflation and the course will be a steady one. This suggests gradually rate cuts and argue for 25bps November, with no move in September. This helped give GBP a little extra momentum and the market is biased to test 0.8450 next week.