Asia Summary and Highlights 16 May
Japan Q1 GDP -0.2% q/q
Japan FM Kato Will seek to have a meeting with Bessent, discuss FX and other matters
RBNZ 2 year inflation expectations 2.29%
Asia Session
The Q1 Japan GDP has shown a contraction of 0.2% q/q, slightly worse than our estimate as private consumption shows no growth. What is worth noting is that the data is before the latest Trump's tariff in April, when the Japanese economic growth will be more negatively affected, suggesting a poor Q2. The U.S. and Japan is estimated to resume another round of trade deal negotiation by the end of month. Japan FM Kato says that he will seek to have a meeting with Bessent, discuss FX and other matters. A second reference to "discuss FX' in a short period of time and keep JPY bids hopeful. USD/JPY is trading 0.32% lower at 145.16.
The RBNZ 2 year inflation expectations has risen to 2.29% from 2.06%. 1yr inflation expectation also rose to 2.41% from 2.15%. It indicates that while RBNZ is clearly on a further easing path, they will be facing inflationary pressure in the coming year that could derail the current trajectory if inflation flares up early. NZD/USD jumped higher and is trading 0.44% higher at 0.5903. AUD/USD also dragged 0.32% higher at 0.6426 while USD/CAD slips 0.12%. Else, EUR/USD is up 0.25% and GBP/USD is up 0.16%.
North American session
Despite a heavy calendar of US data, and lower UST yields, the USD saw little change. USD/JPY was marginally softer at 145.60 and EUR/USD slightly softer at 1.1180. GBP/USD held up better near 1.33 as EUR/GBP fell to near .84. EUR/CHF was also softer near .9340. USD/CAD advanced to 1.40 before reversing to 1.3960. AUD/USD was stable near .64. Equities also saw limited movement.
US April retail sales with a 0.1% rise and unchanged initial claims at 229k provided no real surprises, but April PPI with a 0.5% decline, with ex food and energy down by 0.4% was weaker than expected, if largely offset by upward revisions to March. The detail of May’s Philly Fed and Empire State surveys was mostly improved but April manufacturing output was weak with a 0.4% decline, though overall industrial production was unchanged. May’s NAHB homebuilders survey fell significantly to 34 from 40. Fed’s Powell suggested the 2025 Fed policy framework review would no longer favor average inflation targeting, in which overshoots would be tolerated to compensate for prior undershoots.