KRW: Tech Equity Sentiment Better, Q1 GDP Revised Lower
1 month USD/KRW spent most of the post-Asia close drifting lower. After touching a high of 1259.6, we got to 1254 in NY trading, in line with USD weakness and better equity market sentiment. Note spot closed yesterday onshore at 1257.40. The 50-day MA is at 1248.23.
- Tech equity sentiment was better overnight, the SOX up 0.99%, while the MSCI IT index gained over 1%. Both indices remain within recent ranges though. The China Golden Dragon index continued to recover, up a further 3.33% and above the 100-day MA in a meaningful way for the first time since March 2021.
- Still, the Kospi struggled yesterday, down 1.66%, while offshore investors shed $244mn of local equities. Sentiment should be better today.
- Locally, the focus will be on a potential North Korea nuclear test. This would be the first such test since 2017. The US has stated its response to such a test will be forceful, although it is unlikely to get much support at the UN for a coordinated response in terms of new sanctions, given Russia and China's likely veto.
- On the data front, Q1 GDP has been revised down a touch to 0.6% QoQ (from 0.7%), while YoY growth is 3.0%, versus 3.1% initially reported.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
JPY: Yen Slips Further After Nine-Week Losing Streak
USD/JPY has edged higher this morning after extending its winning streak to nine consecutive weeks on Friday, the longest bull run since 2013. The rate last sits +17 pips at Y130.73, with topside technical focus falling on Apr 28 high of Y131.25, followed by the 1.00 proj of the Feb 24 - Mar 28 - 31 price swing at Y131.96. Bears look for a dip through May 4 low of Y128.63 before targeting Apr 27 low of Y126.95.
- Following the meeting of G7 leaders, PM Kishida confirmed the adoption of a joint plan to phase out Russian oil imports. The latest batch of Japanese opinion polls showed that the public is in favour of tightening sanctions against Russia, while an Asahi survey showed that a record proportion of people (64%) back strengthening national defence.
- Japan will publish March earnings data at the bottom of the hour, with BoJ March monetary policy meeting minutes & final Jibun Bank Services PMI due later in the day.
- Household spending will be published on Tuesday, ahead of Thursday's congestion of releases, which includes BoP current account balance, Eco Watchers Survey & the summary of opinions from the BoJ's April monetary policy meeting.
HONG KONG: Holiday On Monday
A quick reminder that Hong Kong markets will be closed on Monday, on the back of the observance of a national holiday.
US TSYS: Goldman: Less Now, More Later Dynamic Would Carry Implications For Curve, Vol.
Goldman Sachs note that “while the Fed decision itself was largely as expected, Chair Powell’s statement that the committee is not actively considering a 75bp move drove a sizable front-end led reaction. The statement should reduce the range of potential outcomes for the upcoming meetings, and FOMC OIS responded accordingly following the comment, with near-term meeting gaps compressing and implying a peak pace of around 50bp (down from over 60bp in the days leading into the meeting). Upper right volatility also underperformed, reflecting a compression of right tail risk in that part of the surface. Price action on Thursday hinted at a broader potential shift in front-end dynamics, as 2023 forwards led the selloff without much reassessment of the very near-term pace. One interpretation is that the reduction in the potential for even faster hikes in the near term may increase the prospect for more hikes in aggregate. A similar dynamic was visible in the 1994-1995 cycle where a slower peak pace of hikes was correlated with more aggregate tightening being priced. So far this cycle, the reassessment of the terminal rate has been fairly correlated to the front-end, with the market repricing both levels in the same direction. Moving forward, however, to the extent that 50bp is established as a credible upper bound on hike increments, the degree to which the very front-end can participate in future selloffs is limited. This moves the pressure point further out the forward curve, thereby producing a steeper curve than we previously assumed. For similar reasons, we would expect steeper volatility curves as well.”
