Asia Summary and Highlights 14 August
RBNZ cut its cash rate by 25bp to 5.25%
Japan PM Kishida announces he won't be running to stay on as PM.
Asia Session
The RBNZ cut its cash rate by 25bp to 5.25% in the August meeting with significant revision in their forecast and expects inflation to return to three percent in September 2024. The RBNZ reinforce their view that inflation will continue to tread lower after Q2 CPI came in lower than forecast at 3.3%, shaking off the hot labor report in Q2. They cited "Surveyed inflation expectations, firms’ pricing behaviour, headline inflation, and a variety of core inflation measures" are all aligning with their forecast, which was revised significantly. The OCR forecast has been revised lower to 4.92% in December 2024 from 5.65% and at 3.85% in December 2025 from 5.14%. The OCR path shows continuous easing until year end 2026 at 3% terminal rate. Q2 2024 CPI has been revised lower to sub-two percent from three percent. NZD/USD sunk 1.16% on the decision to 0.6007 as market is tilted towards a hold in the July meeting with Q2 CPI remains above 3%, AUD/USD is also 0.15% lower at 0.6624 as regional equities are broadly soft and U.S. three major equity indexes barely in the green while USD/CAD is 0.09% higher.
Japanese Prime Minister Kishida announced he will not seek re-election and effectively stepping down in September.In his press conference, he says Japan must promote wage, investment growth for full exit deflation-prone economy. The political surprise has sent USD/JPY lower to 146.07 before rebounding to 146.93 and turned 0.08% higher for the session as JGB yields slides. Else, EUR/USD is unchanged and GBP/USD is down 0.02%.
North American session
US July PPI data was weaker than expected, up 0.1% overall and unchanged ex food and energy, though slightly stronger at 0.3% ex food and energy and trade with trade prices reversing a strong rise in June. The USD slipped on the data and extended losses well into the afternoon, falling by around 0.5% overall.
USD/JPY, which had peaked near 148, slipped from around 147.50 at the time of the data to 146.75. EUR/USD tested 1.10 from 1.0930, while GBP/USD rose to 1.2865 from 1.2780. EUR/GBP edged off its lows while EUR/CHF advanced to .95. AUD/USD rose to .6635 from below .66 and USD/CAD slipped to 1.3710 from 1.3740.
Before the PPI July’s US NFIB index of small business optimism rose to 93.7, reaching its highest since February 2022, from 91.5, though signals on inflation were softer and there was little market impact.