Asia Summary and Highlights 21 June

Asia Session

Here we have the resumption of jawbone easing from Japan as USD/JPY getting closer to the 160 figure. The higher than expected headline CPI did help the JPY and see early gains above 159 reversed. The Japan May headline CPI has come in higher at 2.8% y/y, less fresh food came in 0.1% lower than expected at 2.5% while ex fresh food and energy continue to tread lower to 2.1% from 2.4% prior. This CPI would be welcoming by the BoJ to support their next step in tightening but looks like most inflationary pressure comes from transitory items. USD/JPY is trading unchanged at 158.89 after touching a high at 159.12 with JGB outpace U.S. Treasury in yields.

USD is trading broadly softer in Asia after a strong New York on Thursday. While regional sentiment sagged, AUD/USD shook it off and is trading 0.17&, NZD/USD is also 0.09% higher while USD/CAD is 0.09% lower as oil slipped ten cents. Else, EUR/USD is up 0.16% and GBP/USD is up 0.04%.

North American session

The BoE left rates unchanged as expected with a 7-2 vote, but the markets saw the statement as dovish boosting the probability of an August rate cut, with higher than expected service inflation seen as respecting factors that would not push up medium term inflation. EUR/GBP bounced above .8450 while GBP/USD slipped below 1.27, later extending to 1.2660 as the USD advanced broadly.

US data was softer than expected with initial claims seeing only a modest correction from last week’s sharp rise, housing starts and permits falling, the Philly Fed less positive and the current account deficit wider. However the USD dip on the data was brief as UST yields picked up, perhaps noting stronger price indices within the Philly Fed breakdown. USD/JPY led the way advancing to 158.90 while EUR/USD fell to near 1.07. AUD/USD however fell only marginally and USD/CAD fell below 1.37.