Asia Summary and Highlights 27 August

Asia Session

The July Japan Corporate Service PPI has came in at 2.8%, lower than prior at 3% but still much higher than sub 1% headline PPI. The wage growth will continue to be inflationary yet the transfusion into consumption is still unsure. Japan's FM Suzuki says FX rates determined by various factors but this time it is not a dejavu of verbal intervention, rather an indirect response to potential questions arising from Fed's rate cut soon. Rapid movement in any direction is generally unfavorable by central banks but JPY has been significantly weakness against USD for the past year or two, thus there maybe some room for rewind before we hear verbal intervention to slow JPY strength. U.S. Treasury yields are higher across the curve while JGB yields lower. USD/JPY stays 0.11% higher at 144.67.

Geopolitical headline surface again on Tuesday's Asia session. Russia is responding to Ukraine's advance by more drone attacks on Kyiv. So far, Russia seems to be focusing on taking more Ukrainian grounds rather then withdrew more front line forces to defend. In the same morning, Taiwan has reported 15 Chinese military aircraft detected over last 24 hours around Taiwan. While no one is expecting a Taiwan invasion but such headline will do risk asset no good in a short run. AUD/USD followed the recovering risk mood and is trading 0.22% higher at 0.6786, NZD/USD is up 0.28% at 0.6222 while USD/CAD slipped 0.04%. Else, EUR/USD and GBP/USD are up 0.07%.

North American session

In generally quiet trade USD/JPY continued to correct post-Powell losses, moving above 144.50. EUR/USD fell to a low of 1.1150 early in the session before correcting to 1.1165, still slightly down on the day. GBP/USD had little direction. USD/CAD lost some ground, with the BoC and Fed paths now looking less divergent, dipping to 1.3475 from around 1.35, with AUD/CAD also weaker. 

July durable goods orders surged by 9.9% on a bounce in aircraft but ex transport orders fell by 0.2% sustaining a subdued underlying tone. August’s Dallas Fed manufacturing index was less negative at -9.7 from -17.5. Fed’s Barkin and Daly sounded moderately dovish. None of this had any significant market impact.