Asia Summary and Highlights 19 Dec
BoJ Hike by 25bps As Expected
Asia Session
The Japan November National CPI arrived at 2.9%, ex fresh food, ex fresh food & energy at 3%. With the inflationary pressure lingers around 3%, it is supportive for the BoJ to hike rates in the December meeting. And indeed as per forecast, the BoJ has hiked rates by 25bps in the December meeting and bring short term interest rate to 0.75%. It came as no surprise given the current inflationary dynamic and the October hold was mostly political. The forward guidance continue to be copy and paste from the BoJ with ambiguity on the timeline of next rate hike. USD/JPY rises by 0.31% to 155.93 for most of the hike is priced in and Ueda's press conference may not bring any hawkish surprise.
The broader risk sentiment is upbeat as we see regional and U.S. equity indexes, except Dow Jones, all pointed north. Nikkei is so far leading the gains as there has not been much hawkish surprise from the BoJ. The greenback is trading broadly higher as we see the EUR/USD down 0.03%, GBP/USD down 0.06%, AUD/USD down 0.1% and NZD/USD down 0.26% while USD/CAD rises 0.08%.
North American session
US CPI was significantly softer than expected, falling to 2.7% yr/yr in November with the core at 2.6%, both from 3.0% in September, with October data not published. The rise over the two months was 0.2% both overall and core, with the latter rounded up. December’s Philly Fed index was weaker at -10.2 from -1.7, but initial claims at 224k from 237k were close to expectations. The BoE eased by 25bps but some were surprised by four dissenting votes. The ECB left rates on hold as expected.
The USD slipped after the CPI but came off its lows and USD losses were generally moderate, USD/JPY to near 155.60 from 155.80 while EUR/USD advanced to 1.1725 from 1.1715. GBP picked up on the BoE with EUR/GBP softer near .8760 from .8780. Equities were supported by the US CPI, but AUD and CAD saw limited movement.