JPY: Asia Wrap - USD/JPY Consolidates Around 147.00
The Asia-Pac USD/JPY range has been 146.77-147.11, Asia is currently trading around 147.00, +0.05%. USD/JPY has consolidated around 147.00 in a quiet session. The demand towards 146.00 has been pretty solid all of July and August, keeping us for the most part in a 146.00-149.00 range. CFTC data for last week shows leveraged accounts again added to JPY shorts so they will be betting on the support to continue to hold. A sustained break below 145.50/146.00 is needed to to turn the focus back to the year's lows towards 140.00.
- MNI Brief: Japan Aug Tokyo Core CPI Rises 2.5% Vs. July 29% - Tokyo’s core inflation slowed to 2.5% y/y but remained above 2% for the 10th straight month. The BOJ expects underlying CPI to weaken temporarily on softer growth before moving back toward its 2% target. Officials judged recent inflation to be stronger than expected, with high rice prices boosting food costs.
- MNI Brief: Japan July Factor Output Posts 1st Drop In 2 Months - Japan’s industrial output fell 1.6% m/m in July, the first drop in two months, after rising 2.1% in June due to weaker auto production. BOJ officials remain cautious over the impact of US tariffs on exports and production, with a focus on potential spillovers to corporate profits and wage growth.
- U/E Rate Down, But Divergences From Steady Job-To-Applicant Ratio: Japan's jobless rate surprised on the downside in July, printing at 2.3%, versus 2.5% forecast, which was also the June outcome. The job-to-applicant ratio ticked down a touch to 1.22, versus 1.23 forecast, while the June outcome was 1.22. Whilst the jobless rate suggests a tight labour market, other indicators are painting a less hawkish picture.
- “AKAZAWA: JAPAN STAFF MEMBERS IN US TO DISCUSS TRADE MATTERS, SEEK EARLY EXECUTIVE ORDER TO LOWER TARIFFS ON JAPAN, EXPECT TO VISIT US BEFORE EXECUTIVE ORDER COMES" - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 145.00($1.17b Aug 29), 146.50($1.14b Aug 29), 147.50($806m Aug 29) - BBG.
Fig 1 : USD/JPY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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GOLD: Bullion Range Trading As Waits For Fed Announcement
Gold prices are off their earlier low to be little changed in the APAC session. They fell to $3322/oz and are now around $3329.4, possibly supported by uncertainty created by tsunami warnings around the Pacific. Bullion has been in a narrow range though as markets wait for the FOMC decision later today (see MNI Fed Preview). Rates are widely forecast to be unchanged and so the tone will be monitored for any changes. Easing is expected for later in the year. US yields and the US dollar are also in a holding pattern.
- Gold will continue to watch US trade talk progress especially with South Korea and Brazil. US data over the rest of the week, especially Friday’s payrolls, could also drive price movements.
- Silver is up slightly at $38.234 after falling to $38.011.
- Equities are mixed with the S&P e-mini up 0.1% & KOSPI +1.2% but Hang Seng down 0.4% and Straits Times -0.4%. Oil prices are moderately higher after rising strongly on Mon/Tues. WTI is +0.1% to $69.29/bbl. Copper is up 0.7%.
- Not only is the Fed decision announced later today but advanced US Q2 GDP and July ADP employment print. Preliminary Q2 euro area GDP, July EC survey, Spanish July CPI, German June retail sales are also released. Data on both sides of the Atlantic will be watched for signs of any tariff impact. BoC also announces but is also expected to be on hold.
AUD: Asia Wrap - AUD/USD Tries Lower On Q2 CPI, No Follow Through
The AUD/USD has had a range of 0.6503 - 0.6529 in the Asia- Pac session, it is currently trading around 0.6510, +0.02%. The pair moved lower after the Q2 CPI print but found demand back towards the 0.6500 area and could not follow through. First support seen around 0.6450 then the more important 0.6350 area. The market's focus will now turn to the FOMC tomorrow morning.
- AUSTRALIA DATA: Core Inflation Moderating Towards Band Mid-Point. Australia’s Q2 trimmed mean CPI printed only 0.1pp above the RBA’s May Q2 forecast, which with the economy developing broadly in line with expectations since the July meeting should allow it to ease 25bp on August 12 when it also releases its updated outlook. Trimmed mean rose 0.6% q/q to be up 2.7% y/y, a moderation from Q1’s 0.7% & 2.9%.
- RBA: VIEW: Westpac Expects Cuts At Next Four SoMP Meetings. Westpac believes two consecutive prints at seasonally-adjusted 0.6-0.7% q/q show that underlying inflation is within the band and so the RBA can continue easing in August. It believes that will be followed by 25bp cuts in November, February and May – all Statement on Monetary Policy meetings that include updated staff forecasts.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6500(AUD469m), 0.6550(AUD1.01b), 0.6600(AUD923m). Upcoming Close Strikes : 0.6600(AUD1.38b July 31), 0.6465(AUD1.01b July31), 0.6465(AUD1.01b Aug 4) - BBG
- CFTC Data shows Asset managers added a decent clip to their shorts -53959(Last -38267), the Leveraged community reduced their own shorts to -12010(Last -20048).
- AUD/JPY - Asia-Pac range 96.31 - 96.75, Asia is trading around 96.45. The pair could not hold above 97.00 on Monday and consolidated overnight. The support between 95.00 - 96.00 held very well last week and the pair is looking to regain its momentum for a move higher. The event-risk coming up this week though could provide some short-term headwinds.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
ASIA: Powerful Earthquake Near Russia Triggers Tsunami Alert From Asia Pac To US
Tsunami warnings continue across Asia Pac and to the US in the aftermath of the powerful earthquake near Russia, earlier today.
- Rtrs notes: "A magnitude 8.8 earthquake struck off Russia's Far Eastern Kamchatka Peninsula on Wednesday, damaging buildings and generating a tsunami of up to 4 metres (13 feet) that prompted warnings and evacuations stretching across the Pacific Ocean."
- From Bloomberg: "...triggering tsunami alerts from Japan to Canada, California, Hawaii, and as far away as Indonesia and New Zealand."
- Tsunami's have already reportedly hit parts of Japan, but could be expected to continue for the next day or so.
- Japan PM Ishiba stated: "It’s possible that the second, third and fourth waves of tsunami could be much bigger” than the first, he said, asking people to remain vigilant until the warning is lifted."
- Headlines also crossed: ""*TSUNAMI WARNING IN EFFECT FOR CALIFORNIA: NWS NTWC" - BBG, ", along with "USCG OCEANIA: ISSUED ORDER FOR ALL COMMERCIAL VESSELS TO EVACUATE ALL COMMERCIAL HARBORS IN HAWAII, ALL HARBORS ARE CLOSED TO INCOMING VESSEL TRAFFIC. - [RTRS]"
- China also noted: "*CHINA ALERTS TSUNAMI MAY HAVE 'DISASTROUS IMPACT' ON ITS COAST" - BBG"
- Market reaction has been fairly limited so far, with JPY gain a little ground on the initial headlines, but there hasn't been any follow through, as the market awaits more details. The 2011 earthquake off the coast of Japan triggered a sharp bout of yen strength.
- Via NYT: "The quake is tied for the sixth-largest on record, according to the U.S. Geological Survey. It is the most powerful since the 2011 earthquake off Japan’s east coast, that triggered the Fukushima tsunami and nuclear disaster."
