SOUTH KOREA: Exports Not Showing Tariff Impact Yet
- South Korea’s April exports rose +3.7% YoY, up from +3.0% in March and topping US$58bn.
- Imports declined by -2.7% to just $53bn but the decline was much less than anticipated by surveys.
- However, when seasonally adjusted April’s export growth was a mere +0.7% indicating that the 10% tariff levied on the country is having an impact. That tariff is expected to increase to 25% after a recently announced 3-month grace period in which Korean officials are frantically negotiating a trade deal.
- The challenge for the Korean economy will be their auto sector with over 40% of exports from the major Korean car companies going to the US.
Ahead of the upcoming Presidential election Korea’s trade minister has been in Washington for talks on a trade deal and US Treasury Secretary Bessent has indicated that an announcement could be forthcoming following the meetings.
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EUR: Consolidating Ahead Of Tariff Announcement
Pretty muted session for EUR/USD considering some of the moves across markets.
- German inflation slowed more than forecast, adding to the surprises by France and Spain on Friday. This should have given ECB officials more confidence heading into their April meeting.
- A headline later though, that ECB officials are wavering on whether to cut interest rates in April due to US trade policies and Europe's military spending, saw traders reduce bets for an April cut.
- EUR/USD had a range of 1.0784 - 1.0849, Asia opens near 1.0820 and feels pretty directionless while we await some certainty over Tariffs.
- EUR remains one of the markets favored instruments to express USD weakness but is particularly vulnerable to President Trump's announcement on Wednesday.
- Negative Tariff headlines could see dips back towards the 1.0600 area but this should find good support and better entry levels for those looking to position themselves for an end to US exceptionalism and an eventual move back to the 1.1000/1.1200 area.
- On the day expect more treading water, while the market bias to sell on rallies in the short term.
Fig 1: EUR/USD Price Action
Source: MNI - Market News/Bloomberg
MNI: MNI BOJ MAR TANKAN LARGE MFG INDEX +12; DEC 14; MEDIAN +12
- MNI BOJ MAR TANKAN LARGE MFG INDEX +12; DEC 14; MEDIAN +12
- BOJ JUNE TANKAN LARGE MFG INDEX FORECAST AT +12
- BOJ TANKAN LARGE NON-MFG INDEX +35; DEC +33; MEDIAN +33
- BOJ JUNE TANKAN LARGE NON-MFG INDEX SEEN AT +28X
JAPAN DATA: Jobless Rate Ticks Lower, But So Does Job-to-Applicant Ratio
Japan's jobless rate for Feb ticked down to 2.4%, versus a 2.5% forecast and 2.5% (which was also the prior outcome). This puts the jobless rate back at 2024 lows, which was fresh cycle lows back to late 2019. This indicates a still tight labor market for Japan.
- The job-to-applicant ratio painted a less positive picture though. It eased to 1.24, versus a 1.26 forecast and prior 1.26 outcome. The chart below plots this index, which is inverted on the chart, against the jobless rate. the two series are diverging somewhat from norms, as we usually see a higher job-to-applicant ratio associated with lower unemployment rates.
- The new job-to-applicant ratio also ticked down, but remains close to recent highs.
Fig 1: Japan Jobless Rate & Job-To-Applicant Ratio (Inverted) Diverging Somewhat
Source: MNI - Market News/Bloomberg
