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JPY

13 Jul 2023

Bullish signals are proliferating.

We have a positive medium-term bias and expect the yen to strengthen over the third quarter and subsequent quarters. We see the currency rising towards 130 by year-end, and into the mid-120’s in a year’s time. This stems from several factors including: (a) Our expectation that the Bank of Japan will embark on a policy normalisation path given the upturn in inflation. Core inflation (all items excluding fresh food and energy) is now running north of 4 percent per annum, the highest since 1981. In our judgment, an ultra-accommodative stance appears untenable, and it seems to be a matter of...

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13 Jul 2023

Softer US data triggers capitulation across currency markets

The dollar is in retreat and currency markets are undergoing a broad-based realignment a day after data was released showing that policymakers might be close to pulling off an “immaculate disinflation” – in which price growth slows without triggering a big rise in unemployment. According to the numbers from the Bureau of Labor Statistics, headline inflation fell to 3 percent year-over-year and core price growth slipped to 4.8 percent in June. Perhaps more importantly, core consumer prices climbed at an annualized 1.9 percent month-over-month pace, with core goods turning negative and the core services category growing at its slowest pace in...

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11 Jul 2023

US CPI in focus

• Softer USD. Strong UK wages has bolstered BoE rate hike expectations, supporting GBP. The JPY has also continued to recover lost ground.• US inflation. Large base-effects & some other drivers point to a sizeable step down in US CPI. If realised, this could exert more pressure on the USD.• AUD events. Ahead of the US CPI, RBA Governor Lowe speaks & the RBNZ policy decision is announced. No change by the RBNZ is expected. Mixed fortunes across markets, with focus still very much on tonight’s US CPI report (10:30pm AEST). Offshore equity indices edged higher (US S&P500 and EuroStoxx50...

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10 Jul 2023

China has a different inflation problem

• Mixed markets. US yields & the USD Index lower. But AUD underperforms as concerns about China’s economic trajectory remain in place.• China deflation risks. China CPI/PPI inflation underwhelmed, another sign the post-COVID recovery is faltering. Measures are needed to reinvigorate demand.• US inflation. US CPI (released Weds night AEST) is a focal point. Base-effects point to a further step down in inflation. This could exert more pressure on the USD. A relatively quiet start to the new week across markets. Overnight, European and US equities posted modest gains (S&P500 +0.2%), oil prices gave back some ground (WTI crude -0.9%),...

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09 Jul 2023

Payrolls weigh on the USD

• US payrolls. Non-farm payrolls came in lower than expected. But other detail in the report shows that the US labour market is still tight.• Softer USD. The USD weakened. US CPI in focus this week. Base-effects point to a further step down in inflation. This could exert more pressure on the USD.• AUD rebound. AUD has bounced back. In addition to the US CPI, RBA Governor Lowe speaks on Wednesday. We think the AUD may recover more ground. A tumultuous week for markets was brought to a close by the release of the US labour market report on Friday....

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