FOREX: FOREX Wrap - USD’s Move Lower Starts To Accelerate

JGB futures are weaker, -35 compared to settlement levels, after dealing in a narrow range. 

• Several headlines have filtered out today on pledged wage rises from major Japanese firms for 2025. Some companies have met lofty demand, while others have come in a little below demands.
• This is a key watch point for the authorities and the BoJ, as it seeks to durably achieve the 2% inflation target.
• The BoJ's board will set policy next week, with economists expecting no move this month, but anticipating a terminal rate of 1.25% in this cycle.
• Cash US bonds are flat to 2bps richer. The February CPI report is the highlight of today’s US session, while some attention will be paid later in the morning to the Bank of Canada which is expected to deliver a 25bp cut.
• Cash JGBs are 1bp richer to 3bps cheaper across benchmarks, with the 20-year outperforming after today’s supply. The 20-year auction delivered mixed results. The low price underperformed dealer forecasts. However, the cover ratio increased to 3.4594x and the auction tail shortened dramatically to 0.20 from 0.55.
• Swap rates are 1-2bps lower, with swap spreads tighter.
• Tomorrow, the local calendar will see Weekly International Investment Flow data. 

Asia Pac equity market trends are mixed in Wednesday trade. We have seen higher trends for some of the tech sensitive plays. The South Korean Kospi is up around 1.5%, while the Taiex is also +1% firmer. In Japan, the Topix is up around 1.00%, but the NKY is up more modestly. 

• Comments from US President Trump at a business roundtable on Tuesday around economic growth and downplaying recession fears, has aided risk appetite. US equity futures are firmer, led by Nasdaq, but Eminis remain sub 5600 at this stage, so still close to recent lows.
• Australian  markets are underperforming though, the ASX 200 off 1.4%. Australia failed to win a reprieve in terms of steel and aluminum tariffs placed on Australian exports to the US. Some miners are lower, but so too are some finance companies. The material sub index is off close to 1%, while the finance sub sector is down by 1.6%, so slightly underperforming the headline moves.
• The ASX 200 is not back to levels not seen since August last year. We are close to 10% off recent Feb highs. See the chart below. The index is now in oversold territory though.
• Hong Kong markets have seen some volatility since the open, but the aggregate HSI is holding modestly lower at this stage, last off nearly 0.70%. The tech index is off a little over 1%.
• Mainland China markets are struggling for positive territory, but modest losses have been seen so far, with the CSI 300 down 0.30%.
• In South East Asia, most markets are weaker. Malaysian markets are down over 1.85%. Indonesian markets up are though. Singapore is close to flat. 

Fig 1: Australian Equities Nearly 10% Off Earlier Feb Highs 

Source: MNI - Market News/Bloomberg 

The USD BBDXY index has ticked up as the Wednesday Asia Pac session has unfolded. We were last just above 1268.0, up around 0.20% versus end Tuesday levels in NY. The index continues to oscillate around its simple 200-day MA and isn't too far from recent lows of 1264.63. EUR/USD is already above its simple 200-day MA, but USD/CNY bounced off the 200-day MA support zone today. 

• Comments from US President Trump at a business roundtable around economic growth and downplaying recession fears, as aided risk appetite. Moving away from some tariff threats on Canada has also likely helped. Tariffs on steel and aluminium came into effect though, with no exemptions.
• US equity futures are modestly higher today, but Eminis remain sub 5600. This benchmark and Nasdaq futures are around 0.30% firmer at this stage. US yields are down slightly, off a little over 1bps for some of the key benchmarks, but this follows Tuesday's sharp rebound.
• USD/JPY is back above 148.00, last near 148.20/25, off around 0.30% in yen terms. Earlier remarks by BoJ Governor Ueda in parliament suggested little concern around the run up in local JGB yields and that there wasn't a big difference between the BOJ and the market's view. Such remarks should support the yen, but better risk appetite is likely offsetting.
• Data showed the PPI close to expectations, but import prices back in negative territory in y/y terms.
• AUD/USD has ticked back under 0.6290, with the A$ a clear laggard during this recent USD run lower (particularly against EU bloc currencies). Local equities are off 1.6%, with Australia not securing an exemption from steel and aluminium tariffs. NZD/USD has also edged down, last back close to 0.5705.
• EUR/USD has edged back to 1.0900, but is close to recent highs of 1.0947. EU equity futures are up around 0.85% so far today.
• US CPI for February is out later and forecast to show a 0.1pp moderation in headline and core to 2.9% y/y and 3.2% y/y respectively. February budget and real earnings data are also released. The BoC decision is announced and it is forecast to cut rates 25bp. The ECB’s Lagarde and Lane speak.