Asia Summary and Highlights 31 Jul

The BoJ kept rates unchanged at 0.5% in the July 31st meeting with inflation forecast revised higher
Trump announces a trade deal with South Korea
Asia Session
BOJ leaves rate at 0.5% as expected with inflation forecast revised higher. Core CPI for 2025 is revised to 2.7% from 2.2%, 1.8% in 2026 and 2% in 2027; while core-core is revised to 2.8% from 2.3%, 1.9% in 2026. The inflation forecast suggest the BoJ will be in no rush to tighten multiple times with 2026 revision remain below 2%. USD/JPY is trading 0.43% lower at 148.83.
Trump announces a trade deal with South Korea. The deal has a similar structure with Japan as it includes a 15% reciprocal tariff, more investment into U.S. and purchase of U.S. LNG. This deal has supported U.S. equities sentiment and see the Nasdaq leading with gains. Regional sentiment is performing individually. AUD/USD us trading 0.53% higher at 0.6467, NZD/USD is also 0.53% hihger at 0.5926 while USD/CAD slips 0.08%. Else, EUR/USD is up 0.26% and GBP/USD is up 0.2%..
North American session
The USD advanced early in the session with the support of stronger than expected US data, firstly a 104k rise in July’s ADP employment report and then a 3.0% gain in Q2 GDP, with core PCE prices also stronger than expected at 2.5%. EUR/USD fell below 1.15 and USD/JPY touched above 149. There was not much reaction to the Bank of Canada decision to leave rates unchanged at 2.75%.
The FOMC also left rates unchanged as expected, at 4.25-4.5%, though Waller and Bowman dissented for easing, and the statement saw economic growth as having moderated in the first of the year, thus downplaying the strength of Q2 GDP which followed a negative Q1. The USD response was limited, with a marginal dip erased before Powell’s press conference started. Powell’s press conference, particularly a cautious tone on the inflationary risks from tariffs, helped the USD to fresh highs, EUR/USD below 1.1420 and USD/JPY above 149.40, despite Powell saying no decision had been made for the next meeting scheduled in September. USD/CAD extended gains well above 1.38 while AUD/CAD fell below .89.