MALAYSIA: First Quarter GDP Surprises to the Downside

February jobs data are released on Thursday and will be again be scrutinised, especially as the RBA said that the tight labour market was the strongest argument to leave policy on hold in February. It is also a key reason why “the Board remains cautious on prospects for further policy easing”, as the labour market “tightened a little further in late 2024” and could be signalling the economy is stronger than assumed. The RBA is also focussed on the underemployment & youth unemployment rates and change in hours worked.

• Employment has consistently printed stronger than expected with January up 44k and 2024 seeing 72k more jobs than 2023 despite restrictive monetary policy.
• Bloomberg consensus is forecasting a 30k rise in employment in February with projections ranging from +15k to +60k with most estimates between +25k and +40k. CBA and Westpac expectations are in line with consensus, while ANZ and NAB are higher at 35k and 45k respectively.
• The 3-month average employment to January was 44.4k and 6-month 41.5k, thus a consensus print would be below the recent trend.
• The unemployment rate is forecast to be stable at 4.1%. Forecasts are between 4.0% and 4.2% with more forecasts for it to fall than to rise at 10 vs 3. January showed an elevated number of people without a job but having one to start in February, which could weigh on February’s unemployment rate. CBA is in line with consensus, whereas ANZ, NAB and Westpac expect it to fall 0.1pp to 4.0%.
• The participation rate is projected to be steady at the record 67.3% (forecast range 67.2-67.4%).

USD/JPY is little changed post the BoJ decision. We were last 149.30/35, close toend Tuesday levels in the US. Ranges today are 149.20-64. The BOJ delivered no change as widely expected, with yen briefly strengthening as BoJ headlines crossed that the virtuous cycle of wages and prices was intensifying, but there was no follow through.

• Focus now shifts to Ueda' press conference later (3:30pm local time). Focus will be on next hike timing, which today's meeting left the door firmly ajar, albeit highlighting large economic uncertainties around the outlook. Current market pricing doesn't have another full rate hike priced in until around the Oct meeting, later this year.
• Attention will then turn to the Fed. US-JP yield differentials have stabilized around Sep lows from last year, the 10yr spread last close to +278bps, the 2yr spread near +322bps. Directionally this stability is not providing further downside impetus to USD/JPY like it was in late Feb/early March.
• Note this Friday we get National CPI data, the market expects headline and core ex fresh food to soften, but the measure which excludes energy is expected to edge up to 2.6%y/y (Jan's read was 2.5%).
• For USD/JPY technicals, upside focus is at the following levels: 
  RES 2: 151.30/36 High Mar 3 / 50-day EMA 
• RES 1: 150.18 High Mar 5 
• Downside focus rests at:
• SUP 1: 147.45/146.54 Low Mar 14 / 11 and the bear trigger  
• SUP 2: 145.40 2.0% 10-dma envelope. 

In early Tokyo afternoon trading, JGB futures are weaker and at session lows, -14 compared to the settlement levels, after the BoJ Policy Decision announcement.

• The BoJ left rates unchanged at 0.50%, as widely expected by sell-side economists and financial market pricing. The decision was unanimous, with a 9-0 vote.
• The central bank announcement came earlier than recent policy announcements, suggesting it didn't take long to build a consensus around today's decision (or there wasn't a strong debate to shift policy setting at this meeting).
• The BoJ left the door clearly ajar for further policy adjustments. It stated that price trends are likely to move in line with its 2% goal in the second half. In particular, the central bank noted that the virtuous cycle of wages and prices was intensifying. This in turn should keep output above potential.
• Still, it noted high uncertainties in terms of the outlook for economic activity and prices.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session ahead of today’s FOMC policy decision.
• Cash JGBs are flat to 1bp cheaper across benchmarks. The benchmark 10-year yield is 0.9bp higher at 1.516% versus the cycle high of 1.58%.
• Swap rates are 1-2bps higher. Swap spreads are wider.