Asia Summary and Highlights 8 Apr
Two Week Ceasefire
RBNZ Kept Rates at 2.25%
Japan February Labor Cash Earning 3.3% y/y
Asia Session
Fortunately, no civilization is ended overnight as we hear from Trump that there will be a two week ceasefire. While Iran announced that such ceasefire will be relied on their ten point proposal, market is reading that as a positive sign. Oil slumped and risk asset cheers, precious metal are also higher. The RBNZ kept rates unchanged at 2.25% in the April meeting and has revised their inflation forecast. They see crude oil price below 100 USD/b by the end of June, which led to their inflation forecast for March to be just 3% y/y and 4.2% y/y in June. It is interesting we are not seeing a hawkish tilt from the RBNZ with 4.2% y/y CPI expected. They are downplaying such with weak demand and spare productive capacity. NZD/USD is trading 1.71% higher at 0.5831. AUD/USD is trading 1.31% higher at 0.7067 while USD/CAD slips 0.36%.
Japan February Labor Cash Earning came in strong at 3.3% y/y, bring real wage to highest level in a long time. It is a good sign for the BoJ as February wage growth did not reflect the strong result from spring wage negotiation, seems to suggest more momentum is in the coming quarter. USD/JPY is trading 0.76% lower at 158.37 as USD lost its geopolitical bids. Else, EUR/USD is down 0.75% and GBP/USD is down 0.94%.
North American session
Trump’s rhetoric reached fresh extremes, threatening that Iranian civilization could die tonight, never to be brought back again. This caused some pressure on equity markets, but not an extreme reaction, suggesting most expect the threat not to be carried out, with some looking for a TACO trade. The USD was marginally softer through most of the session, and a late Pakistani proposal for a two week cease fire saw USD losses extended.
USD/JPY, after finding support at 159.50 ahead of Trump’s remarks later met resistance at 160, before slipping to 159.60 on the Pakistani proposal. The commodity currencies were firmer, AUD/USD rising to .6970 from .6915 and USD/CAD slipping to 1.3890 from 1.3925. EUR/USD also made gains, to 1.16 from a little below 1.1550. EUR/GBP made marginal gains while EUR/CHF picked up to .9250 from .9210.
February durable goods orders with a 1.4% decline, but a 0.8% rise ex transport, were in line with expectations. Fed’s Williams suggested the war would have only a marginal impact on core inflation.