Asia Summary and Highlights 20 Jan
NZ Service PMI Breaks Long Contraction
Asia Session
10yr JGB yields continue to search for higher levels as snap election in February and potentially more stimulus hurt market participants' confidence. 10yr JGB yields are now at level not seen in two decades, so as 2yr yields. The rapid movement could trigger a change to BoJ's bond purchase program, where they are expected to be discussed in the coming meeting. USD/JPY is trading unchanged at 158.13.
The December PSI for New Zealand has entered expansionary area after 21 months of contraction. The strong headline number is encouraging and seems to allow market optimism to build on domestic growth. NZD/USD is trading 0.6% higher at 0.5833. AUD/USD is also trading 0.34% higher on stronger metal while USD/CAD slips 0.14%. Else, EUR/USD is up 0.18% and GBP/USD is up 0.13%.
North American session
US markets were closed for the Martin Luther King Day holiday but the USD had a softer tone, particularly versus the riskier currencies. Comments from German Chancellor Merz suggested caution over retaliation against Trump from the latest tariffs, following similar comments from UK PM Starmer in the European morning. USD/JPY was the exception to the modestly softer USD tone, holding steady.
December Canadian CPI was stronger than expected at 2.4% yr/yr from 2.2%, but inflated by a year ago sales tax holiday. The BoC’s core rates were on balance softer than expected, with CPI-Median falling to 2.5% from 2.8%. Later the Q4 BoC business outlook survey was stronger than in Q3, both for signals on activity and prices. The data had little impact, USD/CAD slippage reflecting the USD tone.