Asia Summary and Highlights 20 June

Asia Session

The New Zealand Q1 GDP has exited recession and return to a growth of 0.2% q/q, beating estimates of 0.1%, 0.3% y/y also beating estimate of 0.2%. The Kiwi jumped on the data but quickly reversed as none are expecting another hike from the RBNZ. Moreover, even as NZ exited recession, the growth is slow and does not show any anticipating strength in the report. NZD/USD is trading 0.03% higher at 0.6133 after touching a session high of 0.6148. The AUD.USD is unchanged while USD/CAD rose 0.07% with oil down ten cents.

The Japan Business Survey is showing only 7% business believe wage can catch up with inflation. Some are suggesting small to medium firms may have a hard time trying to hike wage that is on par of inflation. While it is a survey of sentiment, it would not be favorable as BoJ will likely rationalize the next move in tightening by wage driven demand inflation. USD/JPY is trading 0.06% higher at 158.14 with both the U.S. Treasury and JGB are higher. Else,EUR/USD is up 0.01% and GBP/USD is down 0.05%.

Americas/Europe Afternoon

FX trading was subdued in the Americas and European afternoon, with the U.S. on holiday. Currencies traded in narrow ranges with only GBP holding onto its gains and the EUR losing some ground across the board – some focus on EU deficit criticism of France and Italy.

Focus for the coming days is on the BOE and SNB meetings Thursday, with no expectations for the BOE and a 60% expectations for a 25bps cut from the SNB.  Views on GBP diverge, with some looking for further gains feeling that the BOE will not become more dovish but others feeling that the minutes will likely inflate expectations of an August cut.  Meanwhile, SNB Jordan recent comments have left the market far from certain about a cut, though those that look for a cut feel it could produce some temporary softening of the CHF – safe haven flows over France political jitters are more important.