Asia Summary and Highlights 2 August

Asia Session

The Nikkei has fall almost 5% on Friday's Asia session. While it seems to be poor global risk sentiment, the hawkish tone from BoJ may have spooked investors. The avalanche drew verbal support from multiple Japanese officials in the Japanese economy but is doing little. The fall in Japanese equities seems to have limited the recent JPY strength and lead to a recover of earlier loss. USD/JPY is trading flat at 149.33 after touching a session low of 148.87 with JGB yields falling faster than U.S. T-yields.

The carnage in equities does not seem to bother the Aussie when USD is trading broadly lower and commodity steady. The Q2 Australian PPI has come in stronger than expected, partially echoes the heat in Q2 CPI and the translation in the coming months may keep Australian inflation warmer. The AUD/USD is trading 0.2% higher at 0.6514, NZD/USD is unchanged while USD/CAD slipped 0.1%. Else, EUR/USD is up 0.05% and GBP/USD is down 0.1%.

North American session

There was only a minor reaction to the BoE decision to cut rates, markets noting the close 5:4 vote. EUR/GBP rose by around 10 pips to touch above .8450 on the news but this was soon reversed.

US data was soft, firstly a rise in initial claims to 249k from 235k and a weaker than expected 0.9% annualized rise in unit labor costs, which saw minor USD losses.  Later July’s ISM manufacturing index slipped to 46.8 from 48.5 with employment particularly weak at 43.4 from 49.3. The USD again saw modest knee-jerk losses, but these were erased and more versus the riskier currencies, as a positive start for equities gave way to a sharp sell-off.

USD/JPY, which had peaked near 150.90, slipped to near 149.50 while USD/CHF slipped to .8730 from .8770. However, EUR/USD ended little changed slightly below 1.08 and GBP/USD saw fresh lows for the day below 1.2750 as EUR/GBP moved above its initial high seen after the BoE decision. AUD/USD fell to .65 from a high of .6560 and USD/CAD rose to 1.3870 from a low near 1.38.