Asia Summary and Highlights 7 June
Japan April Overall Household Spending down 1.2%m/m
Chinese export beats but import misses
China small and medium-sized banks have lowered their deposit rates
Asia Session
The Japan Overall Household Spending is down 1.2%m/m in April while y/y arrived at 0.5% as expected. It continue to suggest the translation between higher wage and inflation are yet to materialize. Our central forecast are wary that BoJ will have overestimating the magnitude of wage hike driven inflation and the April data aligns. However, April is only the first month after the historic wage negotiation. If wage picks up in the coming month, it maybe more supportive for further BoJ hikes. Both the U.S. Treasury and JGB yields are higher across the curve and see USD/JPY slips 0.02% to 155.57.
The red regional sentiment diverged from the green U.S. major equities as the mixed trade report show a welcoming beat in export(7.6% y/y) but import (1.8% y/y) missed and continue to point to soft domestic demand. News also crossed the wire that small and medium-sized banks in China have lowered their deposit rates. AUD/USD benefited from proxy support and weaker USD to trade 0.16% higher at 0.6677, NZD/USD is up 0.04% while USD/CAD slipped the same 0.04% with oil up ten cents. Else, EUR/USD is up 0.08% and GBP/USD is unchanged.
North American session
EUR/USD bounced on the ECB decision, briefly reaching 1.09, with the 25bps rate cut fully discounted and markets noting a lack of forward guidance. However, with Lagarde confirming the earlier message from Lane that tighter policy is still feeding through and that real rates have risen the move above 1.09 was brief.
EUR/USD however remained above pre-ECB levels and with the USD generally softer into the afternoon a move back to near 1.09 was seen. EUR made modest gains versus GBP, CHF and SEK, but gains in EUR/NOK were erased.
US data was on the soft side, initial claims rising to 229k from 222k though possibly influenced by the Memorial Day holiday, and Q1 unit labor costs revised down to 4.0% from 4.7%. USD/JPY fell to near 155.50 from near 156.20 leaving EUR/JPY down on the day. AUD and CAD largely erased earlier losses seen versus the USD.