Asia Summary and Highlights 6 August
Japan Labor Cash Earning +4.5% y/y and Household Spending +1.1% m/m but -1.4% y/y
RBA holds as per forecast
Asia Session
The reversal in the market continues in the Asia session on Tuesday. While data is not the market moving part, we have a strong Labor Cash Earning from Japan that came in at +4.5% y/y, a level that will be much appreciated by the BoJ to reinforce their decision in July. Household spending is also seeing some improvement by 1.1% m/m even it is still down 1.4% y/y. All of such is in favor of BoJ's act to further tighten yet its magnitude need to follow through in the coming months. USD/JPY is trading 0.94% higher at 145.46 with both the U.S. Treasury and JGB yields higher.
Major equity indexes are seeing rebound with the Nikkei trying to recoup Monday's lost ground and is currently up 8.7%. U.S. three major equity indexes are up less than a percent. The RBA has kept cash rate at 4.35% as per forecast. While the latest CPI data show stubbornness, it lacks evidence such will continue or flare up and thus does not support a change of policy rate from the RBA. AUD/USD is trading 0.17% higher at 0.6507 after touching session high at 0.6540, NZD/USD fell 0.1% to 0.5933 while USD/CAD slipped 9 pips on slightly higher oil. Else, EUR/USD and GBP/USD are unchanged.
North American session
Equities opened sharply weaker but saw a partial correction assisted by a firmer ISM services index of 51.4 from 48.8, with employment at 51.1 from 46.1 reaching its highest level since September. This saw USD/JPY recovering from near 142 to 144.89, before slipping back to around 143.75 as the equity recovery faded. The commodity currencies saw modest gains, AUD/USD reaching .65. EUR/USD briefly touched above 1.10 in early trade before settling near 1.0955. GBP/USD was fairly stable around 1.2770. USD/CHF was more volatile with eyes on equities but ended little changed near .85.
Fed’s Goolsbee again downplayed the weakness of Friday’s employment data, without sounding hawkish. The Fed’s Q3 Senior Loan Officer Opinion Survey of bank lending practices saw less negative findings than in Q2. The latter had no market impact with the equity recovery having lost momentum.