Asia Summary and Highlights 26 Jan

Asia Session

Friday's Asia session so far is quiet with major FX pairs in limited range.  The January Tokyo CPI has surprised to the down side as headline came in at 1.6% vs expectation of 2%, slumping from 2.4% in December. Less fresh food also dropped from 2.1% to 1.6% in January, so as less fresh food and energy to 3.1% from 3.5%. Despite base effect maybe a factor, it no doubts show a slower inflation picture and will allow the BoJ to  be patient in exit loose monetary policy.  USD/JPY took the cue to trade 0.09% higher at 147.78 with JGBs yields falling more than U.S. Treasury Yields.

Broad risk sentiment is soft on Friday and the USD is trading stronger against most peers. But the Aussie seems to have drawn support from news that the Ministry of Housing and Urban-Rural Development started an inaugural meeting of the Urban Real Estate Financing Coordination Mechanism, which also prompted up the property development equities in Hong Kong. The AUD/USD is trading 0.04% higher at 0.6587, NZD/USD is 0.05% lower at 0.6108 while USD/CAD slipped 0.05% despite oil 20 cents lower. Elsewhere, EUR/USD is 0.05% lower and GBP/USD is 0.03% lower.

North American session

The USD gained ground through the North American session, with EUR weakness the main theme on the back of what was perceived as a less hawkish press conference after the ECB meeting from president Lagarde. The ECB left rates unchanged as expected, but acknowledged the decline in inflation had continued, and admitted risks to growth to the downside. EUR/USD fell by more than half a figure to 1.0830. EUR/GBP fell from .8560 to .8530 and EUR/CHF returned to .94 after earlier rising to .9420.

The USD also initially fell against the JPY after the US GDP data, dropping to 147.20, as US yields fell even though the Q4 GDP data was on the strong side of expectations, at 3.3% annualised. The decline in US yields and the USD may have related to the lower than expected GDP price index of 1.5%, even though the core PCE deflator was steady as expected at 2.0%. An upward correction in initial claims 214k may also have played a pat though this did no more than offset last week’s very low 189k outcome. However, USD/JPY recovered to opening levels by the end of the session. Despite the USD being stronger overall, USD/CAD was weaker, falling below 1.35.