Asia Summary and Highlights 19 September

Asia Session

As market participants digested FOMC's 50bps cut, the sell the fact trade on USD continues as we see broad based strength in the greenback with a part of it vaporized as session progress. With U.S. Treasury Yields rising faster than JGB yields, USD/JPY once traded more than a percent higher at 143.94 but has since retreated to 143.19 now, still up 0.65% for the session. The gains in U.S. Treasury Yields have moderate while JGB yields little changed since, which seems to be contributing to the early gains being erased.

The broad risk mood is positive as market participants digest FOMC decision. Major equity indexes closed lower after volatile trading post FOMC. In this Asia session, it seems to suggest there is still buying interest out there as Fed cuts. The Australian August employment change remains solid and increased by 47.5k while unemployment and participation rate stayed at 4.2% and 67.1%. Some shine was taken away from the report as most of the employment gains came from part time opening. AUD/USD is trading 0.44% higher at 0.6793, NZD/USD is dragged by their Q2 GDP contraction of -0.2% q/q and is still up 0.14% to 0.6216 as the contraction had been previewed by RBNZ while USD/CAD slips 0.06% on higher oil. Else, EUR/USD is up 0.04% and GBP/USD is close to unchanged.

North American session

Ahead of the FOMC the USD saw some early losses versus EUR, GBP and CAD which were reversed and the USD was little changed ahead of the decision. The losses came despite stronger than expected US housing starts and permits data, up 9.6% and 4.9% respectively. Bank of Canada minutes from September 4 were reasonably balanced, open to a faster or slower pace of easing, dependent on data, which gave the CAD a marginal boost. 

The 50bps FOMC easing initially hit the USD, USD/JPY dipping to a low of 140.45 from near 142, while EUR/USD peaked at 1.1189 from near 1.1125 ahead of the decision. However dots saw a relatively cautious pace of easing going forward, with 50bps more in the remaining two meetings this year and 100bps in 2025, with the neutral rate of 2.875% not reached until 2026. At the press conference Powell stated none should think 50bps is the new pace. By the end of the press conference the USD had largely reversed its losses. Late trade saw the USD moving higher, with USD/JPY briefly touching above 142.50 and EUR/USD briefly touching below 1.11.  Similar moves were seen elsewhere. GBP/USD fell below 1.32 after peaking near 1.33. AUD/USD failed to hold a move above .68 while USD/CAD advanced above 1.36.