MNI ASIA PAC Weekly Macro Wrap:

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Executive Summary:

JAPAN 

• A trade deal has been reached between the US and Japan ahead of the August 1 deadline. Imports from Japan, including autos, will face a 15% tariff down from the 24% announced in April but higher than the current average below 5%. This lower rate is in exchange for $550bn of Japanese investment in the US.

AUSTRALIA 

• RBA July minutes showed that the majority of members decided the best decision was to keep rates unchanged and wait for more information to be confident that inflation will “sustainably” return to the band mid-point and to be gradual and cautious, which was factored into the May forecasts. Uncertainty over the degree of restrictiveness was also a factor and one that is likely to impact future decisions.

NEW ZEALAND

• The RBNZ’s sector factor model result for Q2 was in line with other underlying CPI measures showing that core inflation remained below the top of the 1-3% target band. Its measure of core inflation eased 0.1pp to 2.8% y/y, the lowest rate since Q2 2021, and is now only 0.1pp above headline CPI. Underlying non-tradeables also continued to moderate. Thus with activity data still lacklustre, another 25bp rate cut on August 20 seems likely.

SHORT TERM RATES 

• Interest rate expectations across dollar-bloc economies were relatively stable over the past week, with Australia and New Zealand standing out. Australian rates moved 5bps higher, while New Zealand saw a 7bps decline. U.S. and Canadian rates were little changed.

CHINA 

• Data flow has been light this past week, with China’s US Tsy holdings an onshore focus point. 

SOUTH KOREA 

• South Korean data has mostly improved, with consumer sentiment at multi year highs, while Q2 GDP rebounded more than forecast.  

ASIA 

• The lower Malaysia CPI vindicated the recent BNM policy easing. Next week the MAS decision in Singapore is due, with mixed viewpoints in terms of whether the central bank will ease again. Thailand selected a new BoT Governor who is expected to be more dovish. 

ASIA EQUITY FLOWS 

• Taiwan inflows and a resurgent backdrop for Thailand inflows have been focus points this past week. As global equity momentum improved so too did flow momentum for the broader region.