Asia Summary and Highlights 8 Mar

Asia Session

The January Household spending is showing a dismay start for the Japanese economy in 2024. Japan January Household Spending contracted by 6.3% y/y from -2.5%y/y in December, month to month contraction is also higher than estimate. Looking at the bright side, we see wage growth accelerates and is expected to accelerate further after wage negotiation, which should support the recovery in consumption. USD/JPY slips 0.14% to 147.83 as market increasingly speculate a March hike as Japanese officials white knight the poor household spending report swiftly.

U.S. Treasury Yields are lower across the curve with little impact from Biden's speech. Risk sentiment is generally positive and supported the AUD/USD to be 0.1% higher at 0.6627 while NZD/USD slipped 0.02% to 0.6173 and USD/CAD losing 0.08% on oil recovering early losses. Elsewhere, the FX market is relatively quiet waiting for U.S. data and see EUR/USD down 0.02% and GBP/USD down 0.01%.

North American session

The EUR gained ground through the North American session. Initially, EUR/USD dipped slightly following the ECB announcement of unchanged policy, with the statement initially seemingly interpreted as mildly dovish. But even though EUR front end yields stayed lower on the day, EUR/USD rebounded after the initial dip, gaining around 50 pips on the session to near 1.0950. 

The USD was also generally weaker elsewhere, except against the JPY, with USD/JPY rising around 30 pips after dipping below 148 in the European morning.  Fed’s Powell repeated his Wednesday testimony to Senate and stated in the Q+A that the Fed was not far from having the necessary confidence on inflation to ease, though Fed’s Mester in separate remarks sounded more cautious. Data showed unchanged initial claims at 217k but a wider than expected trade deficit for January.