Asia Summary and Highlights 15 May
China foreign ministry says we should reopen Hormuz ASAP
Asia Session
Broader market sentiment sours as the Xi-Trump meet ended without significant fruit. There are scattered deals on Boeing and other purchase but those aren't the major sticking point. Even when we hear from China foreign ministry saying "we" should reopen Hormuz asap, there is a lack of concrete action plan to persuade the market. Moreover, Fed speakers talked down the likelihood of rate hikes, given the current macroeconomic picture, extinguished the hope of speculators. Most major equity indexes are in the red, so as precious metal. AUD/USD is trading 0.61% lower at 0.7176. NZD/USD is trading 0.7% lower while USD/CAD rises 0.21% with both Brent and WTI higher.
With USD gaining broadly on risk aversive Friday, USD/JPY inevitable goes north and have its eyes on the 160 mark. We haven't heard any jawboning for the past few days but the current trajectory guarantees one is near. The jump in long end yields are also alarming with 10yr JGB yields up by 10% in a week, suggesting market confidence in Japan government is fading again in the likelihood of extra energy stimulus. USD/JPY is trading 0.1% higher at 158.51. Else, EUR/USD is down 0.2% and GBP/USD is down 0.31%.
North American session
US April retail sales with a rise of 0.5% overall, 0.7% ex auto and 0.5% ex auto and gasoline were in line with expectations, while initial claims picked up to a still low 211k from 199k. The data still suggests economic resilience. The response to the data was modest but the USD gained some momentum later in the session, USD/JPY moving above 158 to 158.20 and EUR/USD falling below 1.17 to 1.1680. The USD made similar gains versus AUD and CAD. The passing of 30 Chinese ships through the Start of Hormuz was a cautiously positive signal, but reports of Iran seizing a separate ship caused concern.
GBP political risks picked up with the resignation of Health Secretary Streeting and the resignation of a Labour MP intending to allow Manchester Mayor Burnham back into parliament both raised the prospect of a serious challenge to PM Starmer’s leadership. EUR/GBP moved above .87 from .8660 while GBP/USD fell to 1.34 from 1.35. In contrast EUR/CHF was marginally softer.