Asia Summary and Highlights 28 Jan
RBA Trimmed Mean CPI Surprised to the Upside
Asia Session
The Q4 CPI has surprised to the upside for Australia. More importantly, the RBA preferred trim mean CPI is showing even more hawkish surprise than headline CPI. The strong inflationary pressure will further exacerbate market participants' anticipation of an upcoming hike. On balance, we do not see an imminent hike from the RBA without a change in forward guidance first. AUD/USD is trading 0.36% lower at 0.6987 after an initial pop on the headline. NZD/USD is also trading 0.33% lower while USD/CAD rises 0.08%.
The BoJ December Minutes are "hawkish" with members see inflation becoming more entrenched. They also suggest "No preset hiking path, but further tightening firmly on the table", which is similar to the rhetoric they have been holding for the past quarter. Weak yen and labor shortages are being mentioned to be inflation drivers. USD/JPY is trading 0.26% higher at 152.56 as JGBB yields falling faster than U.S. Treasury yields. Else, EUR/USD is down 0.36% and GBP/USD is down 0.32%.
European and North American sessions
Steep USD losses continued, both before and after a fall in US consumer confidence to 84.5 in January from 94.2 in December, reaching its weakest level since May 2014. Late in the day Trump signaled he was unconcerned about the USD’s slide, and a further sharp break lower was seen.
After a modest correction in Asia USD/JPY resumed its slide, falling over two big figures to near 152.50, and breaking below on Trump’s comments. EUR/USD saw a sustained move above 1.19 and broke through 1.20 on Trump’s comments. GBP/USD broke above 1.38 even with EUR/GBP rising above .8690 from .8675. EUR/CHF was however significantly lower at .9175 from .9230. AUD/USD saw a late break above .70 after Trump spoke while USD/CAD moved back below 1.36, which had already been briefly achieved earlier in the session.