Asia Summary and Highlights 22 May
RBNZ kept rates at 5.5% but suggest rates higher for longer
Japan April Exports +8.3% y/y and Imports +8.3%
Asia Session
The RBNZ has decided to keep OCR at 5.5% in the May meeting but the OCR forecast in 2025 has been revised almost 25bps higher. By September 2025, the OCR forecast has been revised almost 25bps higher and around 3% by mid 2027. The revision seems to suggest the RBNZ is not looking for an imminent hike, rather OCR will be staying higher for longer. NZD/USD initially jumped higher but gains were partially retraced as it does not suggest an imminent hike. NZD/USD is still trading 0.48% higher at 0.6120 with session high at 0.6153, AUD/USD is also dragged 0.11% higher at 0.6672 while USD/CAD slipped 0.1%.
The latest trade data from Japan suggest domestic demand is seeing a rebound with import back to positive territory. Export to China and U.S. continue to grow close to double digit but export to E.U. has contracted for April. Yet, domestic economics data has captured little JPY traders' eyeballs. U.S. Treasury and JGB Yields are both higher for the session with 10yr JGB inch distance from one percent. USD/JPY is trading 0.12% higher at 156.32. Else, EUR/USD is unchanged and GBP/USD is up 0.03%.
North American session
The most significant market move came in USD/CAD, which bounced to 1.3675 from 1.3620 on a softer Canadian CPI before settling near 1.3650. Yr/yr growth fell to 2.7% from 2.9% while progress lower in the BoC’s core rates raised hopes for a June BoC easing.
Elsewhere there was little net movement. The USD briefly spiked with front end yields on comments by Fed’s Waller who said several more months of good inflation were needed to cut rates, though the details of the remarks were more balanced and the move quickly faded. USD/JPY later saw a brief move below 156 but this was not sustained.