Asia Summary and Highlights 16 Jan

Iran firing missiles into Iraq with consequent fatalities, reported to be close to the US Consulate in Erbil.
Regional equities sunk on geopolitical tension.
Asia Session
On Tuesday Asia session, it was reported that Iran had fired missiles into Iraq with consequent fatalities and was close to the US Consulate in Erbil. Moreover, a branch of Iranian Armed Forces are also exhibiting hostile behavior to merchant ship in the Red Sea. This is no doubt a further escalation of geopolitical tension around Middle East and see risk asset take a nosedive as it is hard to see the U.S. not retaliate. USD is trading broadly higher on haven bids. And as commodity also being soft, there is no support for the Aussie and AUD/USD is trading 0.72% lower at 0.6611, NZD/USD is also 0.52% lower at 0.6168 while USD/CAD rose 0.39%.
U.S. Treasury Yields are higher across the curve so as JGB yields for it looks like a sell everything market in sight of heightened geopolitical tension. USd is outbidding the JPY when market participants are searching for haven. We are also hearing from the Japan business federation chief that he strongly ask firms to push forward with wage hikes and PPI beats estimate to rise 0.3% m/m. USD/JPY is quickly approaching last week high to trade 0.35% higher at 146.19. Elsewhere, EUR/USD is 0.28% lower and GBP/USD is 0.37% lower.
North American session
A generally quiet North American session due to the US holiday saw relatively little FX movement. However, the Bank of Canada’s Q4 business and consumer surveys made for some interesting reading. The business survey showed clear signs of weakness. A net 39% of firms said their sales volumes had fallen over the last 12 months – the largest since the GFC (excluding the pandemic). The consumer survey showed consumers believe inflation has fallen, but their expectations for inflation in the near term are showing little progress in returning to pre-pandemic levels. Slow progress may be due to persistently high inflation expectations for services such as rent.