Asia Summary and Highlights 26 Apr
Overview - The USD ended slightly weaker, as gains on stronger than expected Q1 core PCE price data were erased.
Asia Session
Aligned with our forecast, The BoJ has decided to keep rates unchanged at 0-0.1%. While the monetary policy statement is a short one, key economic forecast has been revised. 2024 less fresh food CPI has been revised higher to 2.8% from 2.4% and 2025 from 1.8% to 1.9%, while less fresh food & energy is unchanged in the big figure. 2024 GDP has been revised lower to 0.8% from 1.2% and 2025 unchanged. From the rhetoric "expect accommodative monetary conditions to continue for the time being" and "extremely high uncertainties on Japan's economic and price outlook", it echoes with our view that BoJ is in no rush to further tighten and would rather let data plays out their role. Tokyo CPI that missed estimate have been overlooked as market participants question the latest change of CPI calculation with high school tuition. Tokyo headline April CPI came in at 1.8%, less fresh food 1.6% and less fresh food & energy 1.8%. While market participants await Ueda's press conference, it is hard for him to be hawkish with the current forecast and statement. USD/JPY is seen trading 0.24% higher at 156.02 with JGB yields outpacing their U.S counterpart but has erased partial opening gains.
Risk sentiment is broadly positive as the after hours jump In Alphabet and Microsoft signals a more cheerful mood. Regional sentiment follows with Chinese, Hong Kong and Japan major equity indexes all in the green. helping Aussie to fight against the solid USD. AUD/USD is trading 0.08% higher at 0.6523, NZD/USD is 0.11% higher at 0.5955 while USD/CAD is unchanged. Else, EUR/USD is down 0.06% and GBP/USD down 0.11%.
North American session
A weaker than expected 1.6% US GDP increase saw only a very brief knee-jerk USD dip, EUR/USD reaching 1.0739, given a stronger than expected 3.7% rise in the core PCE price index. With UST yields higher the USD advanced, with EUR/USD bottoming at 1.0678, though the USD gains were subsequently erased, with EUR/USD again touching its earlier high.
Most currencies showed similar moves to EUR/USD though USD/JPY kept to a right range near 155.55 while CAD slightly outperformed AUD, as AUD/CAD fell to .89.
US GDP details showed negatives from net exports and inventories, with domestic demand still solid. This was reflected in a wider March advance goods trade deficit. Other US data showed initial claims falling to 207k from 212k and later a stronger than expected 3.4% rise in pending home sales.