Asia Summary and Highlights 18 Jan

Asia Session

The Australian Dec labor report has missed estimate badly at -65.1K with expectation of +17.6K and unemployment rate at 3.9%. Participation rate also lowered from 67.2% to 66.8%. The December report more than neutralized November's strength but should not be used to determine a significant weakening in the Australian labors market as one single month is not comprehensive enough. Yet, there is no doubt very unlikely we will see persistent strength in which  as capacity has been long fully utilized. Chinese equities slumped when Chinese Premier Li Qiang signaled Beijing won’t resort to huge stimulus to revive growth amid the worst bout of deflation in decades in the World Economics Forum.The perfect storm brought the AUD/USD to 0.6526 earlier before rebounding to trade 0.1% higher at 0.6658 now, NZD/USD was also choppy and trade close to unchanged at 0.6117, up 0.02% while USD/CAD slipped 0.09% as oil inches higher.

More geopolitical headline crossed the wire with US military conducted another round of strikes on Houthi targets in Yemen and Pakistan Foreign Ministry confirms Pakistan undertook series of military strikes in Iran. This seems to suggest early signs of geopolitical tension spreading and getting neighbor countries to involve. U.S. Treasury Yields are lower, along with major equity indexes seems to suggest a sour risk mood. The lower yield also  lead to some offers in the greenback. 10yr JGBs rose on the session and supports the JPY to see USD/JPY trade 0.13% lower at 147.99. Elsewhere, EUR/USD is up 0.11% and GBP/USD is up 0.04%.

North American session
The USD continued to make gains in the North American session, before a late correction. The JPY and the AUD remained the two currencies suffering the most. USD/JPY gained around 80 pips to 148.50, while AUD/USD fell 30 pips to 0.6530 before marginal corrections. European pairs also saw some slippage, but much more modestly, and by the end of the session were back near the day’s highs.
The USD and UST yields were lifted by stronger than expected US retail sales for December, which rose by 0.6%, 0.4% ex autos, with the control group, which contributes to GDP, particularly strong at 0.8%. A subsequent 0.1% rise in December industrial production was marginally above consensus and a rise in January’s NAHB homebuilders’ index to 44 from 37 more significantly so. The Fed’s Beige Book however painted a fairly subdued picture, though confirmed consumer resilience and optimism for lower rates.