Asia Summary and Highlights 18 Mar

Asia Session

The BoJ meeting will be conducted from Monday to Tuesday and market participants should be ready for any "leaks" coming out as they will be market moving. Some big names are forecasting a hike in the March meeting but we feel like the BoJ is in no rush to hike with headline CPI moderating faster and the second to third round of wage negotiations still ongoing for small and medium firms. There are a variety of possible outcomes with changing the forward guidance a staple and officially removing YCC unlikely to be market moving given the current level of yields. A hawkish surprise would be BoJ directly hike to 0.1% and keep the doors open for more tightening and a dovish one would be no hike.  On Monday Asia session, Bank of Japan announced they would conduct an unscheduled bond buying operation. This is an interesting one as most expect a scrapping of YCC on Tuesday and we did not see a spike in yield as previous intervention. This seems to be a preemptive move, which signals the BoJ is expecting the yields to rise on Tuesday and suggest very likely the YCC will be scrapped as expected.  USD/JPY is patiently waiting for "leaks" and is trading 0.08% higher at 149.11 with JGB yields falling more than U.S. T-yields.

When compared to the BoJ, RBA can almost be assured there will be no fireworks. The current inflation dynamics does not support for a hike or cut as CPI remains above target range yet moderating along with forecast. RBA will likely give us another copy and paste statement because they prefer the flexibility to act if CPI spikes. The AUD/USD is supported by better than expected Chinese data on Monday and us trading 0.05% higher at 0.6563, NZD/USD is 0.12% higher at 0.6091 while USD/CAD rose 0.02% to 1.3540. Elsewhere, EUR/USD is down 0.02% and GBP/USD is down 0.06%. 

North American session

The USD made some general gains through the North American session, in what was generally a fairly newsless session. USD/JPY made the biggest gains, rising around 40 pips to trade above 149. The USD also made marginal gains against the commodity and European currencies, but ranges were very tight. 

There wasn’t a great deal to drive trade, with data mixed though equities lost some ground. The Empire manufacturing survey was weak at -20.9 and import prices on consensus with a 0.3% rise. Industrial production up a marginal 0.1% but with manufacturing rising by 0.8%, and, Michigan sentiment little changed at 76.5 from 76.9.