European Summary and Highlights 07 Mar
The AUD and JPY gained ground through the European morning, both gaining around 0.4% against the USD, while EUR/USD was fairly steady, edging slightly lower below 1.09.
European morning session
The AUD and JPY gained ground through the European morning, both gaining around 0.4% against the USD, while EUR/USD was fairly steady, edging slightly lower below 1.09. Indeed, the EUR was generally weaker, losing ground to GBP, CHF and scandis, most of which also made modest gains against the USD. USD/CAD was also slightly lower. JPY strength looks to have been a hangover from the more positive tone in Asia related to the evidence of rising Japanese wage pressure.
EUR weakness may have been partly due to the weak German manufacturing orders data released early in the session, which showed a huge 11.3% drop in January. However, this followed an equally huge 12% rise in December, so isn’t really of great significance. The upcoming ECB meeting, and some fears of a softer ECB stance, may also be weighing on the EUR.
Asia session
Japan's labor cash earning finally reached 2% for January. January Cash earnings came in at +2% y/y with expected at +1.3% and prior +0.8%. While real wage growth remains negative, the headline growth is good enough in BoJ's eye to be supportive for a sustainable trend inflation. Japan's largest industrial union UA Zensen said that wage hikes negotiated so far has been stronger than last year, so far full-time workers has negotiated for a 6.7% including base pay rise of 5.15%. If such is the scenario, it will be of great support towards BoJ's decision in moving monetary policy away from ultra-loose. USD/JPY is down more than half a percent by 0.53% to 148.57 with JGB yields rising more than U.S. Treasury yields.
The Australian February headline trade balance is stronger than in January but confirms the turn in domestic demand as import growth weakens to 1.3% from 4.8%. It does not mean the Australian economy is weak but suggest consumption would be as supportive in economics growth as it does in the 2023 when rate hikes and inflationary pressure seem to be neglected by Australians. While regional sentiment remains soft, AUD/USD benefited from softer USD and is trading 0.2% higher at 0.6577, NZD/USD also 0.22% higher at 0.6142 while USD/CAD barely lose 0.02%. Else, EUR/USD is up 0.03% and GBP/USD is 0.02%.