Asia Summary and Highlights 10 July

Asia Session

RBNZ kept rates unchanged at 5.5% and suggest inflation approaching target range."Restrictive monetary policy has significantly reduced consumer price inflation, with the Committee expecting headline inflation to return to within the 1 to 3 percent target range in the second half of this year." The RBNZ openly stated inflation is approaching target range in their title, which is a turn around from May's statement when they suggest rate would be higher for longer. It seems to suggest the Q2 CPI would likely tread lower.  The forward guidance is changed to "The Committee agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures." from "The Committee agreed that monetary policy needs to remain restrictive to ensure inflation returns to target within a reasonable timeframe." The RBNZ is signalling current inflationary dynamics are following their playbook and they are ready to ease when CPI reaches target range. NZD/USD sunk on release and is currently trading 0.56% lower at 0.6090 with session low at 0.6075. AUD/USD is up 0.07% at 0.6746 while USD/CAD slipped 0.04%.

U.S. Treasury and JGB yields are both higher across the curve with global risk sentiment broadly positive. The June Japan PPI continue to stay below 1% m/m at 0.2%, seems to have further lowering inflation expectations. USD/JPY is trading 0.1% higher at 161.44. The upside traction seems to be resuming and we could see another challenge of 161.95 July high. Else, EUR/USD and GBP/USD are up 0.06%.

North American session

Focus was on Fed Chairman Powell’s testimony to the Senate, in which he said that more good inflation data was needed before easing, and saw risks both from easing too soon or by too much, or too late or too little. While he also said the labor market was not overheated, yields edged higher, particularly at the long end, giving modest support to the USD. 

USD/JPY rose from near 160 to briefly hit 161.50 before returning to 161.30. EUR/USD saw only marginal slippage with 1.08 holding. EUR advanced versus GBP but slipped versus the CHF. AUD and CAD saw little change versus the USD, and in late trade saw marginal gains as the USD came off its highs.