Asia Summary and Highlights 18 Dec
BoJ's statement will be release on Tuesday Asia, JPY traders will be on the side line to avoid getting wrong footed by any BoJ's "surprise"
Kiwi higher on supportive data
Asia Session
The all important BoJ decision will be released on Tuesday's Asia session, our central forecast will be change in forward guidance for BoJ to signal they will be exiting ultra-loose monetary policy and return interest rate to 0% in Q1 2024. Some market participants maybe speculating a more aggressive approach from the BoJ to hike in the December meeting, yet we do not see the BoJ has such urgency. So far on Monday's Asia session, there has been no headline coming from the BoJ or Japanese official side, letting the pair to go with the flow. USD/JPY is trading 0.03% higher at 142.18 while U.S. Treasury and JGB Yields are all lower.
Kiwi has a rough opening against the USD but soon turned to perform the best against the greenback within majors. Both the consumer confidence and business PMI showed improvement in November and seems to be supporting the Kiwi on Monday. There has been speculations in the previous weeks on potential RBNZ OCR hike from the forecast revision and that is why such tier two data become lively in the recent session for the NZD. NZD/USD is trading 0.42% higher at 0.6234. AUD/USD is up barely 5 pips on soft regional sentiment but softer USD, while USD/CAD is unchanged. EUR/USD is 0.18% higher and GBP/USD is 0.14% higher.
North American session
The USD gained ground through the North American session, boosted by the comments from the Fed’s Williams, who suggested that the market had overreacted to the FOMC. Fed’s Bostic was also cautious about easing, though Goolsbee sounded more dovish. EUR/USD lost over half a figure to touch below 1.09, while USD/JPY made more modest gains above 142.
However, US data was generally weak. The Empire manufacturing index fell sharply into negative territory, and both industrial production and manufacturing PMI suggested softness, but the services PMI was better than expected.
BoC governor Macklem said 2% inflation was in sight, but said it was too early to cut rates and the CAD outperformed, with USD/CAD dropping modestly to 1.3370.