Asia Summary and Highlights 19 Apr
Israel retaliated with potential missile and drones attack in Iran
But Iran said "there have been no airstrikes, only shot-down quadcopters"
Japan National y/y CPI at 2.7%, down from 2.8%
Asia Session
On Friday's Asia session, it was reported that Israel has retaliated and struck multiple targets in Syria and Iran. It seized market's attention as it may lead to another round of escalation in the already tense geopolitical picture. As the fog of war spreads, risk asset was offered and havens are bid. The session progress with Iran saying "there have been no airstrikes, only shot-down quadcopters" and calms the market. From the Japan front, we see y/y National CPI coming in lower than estimate at 2.7%, ex fresh food 2.6%, ex fresh food and energy at 2.9%, all showing further moderation from February. We expect such to continue throughout of the rest of 2024 with speed bumps in the coming month on wage spike. USD/JPY dropped to 153.58 on geopolitical fear before quickly rebounded to 154.26 to trade 0.25% lower with U.S. Treasury and JGB Yields all lower.
Equities in a sea of red globally on geopolitical fear. While off their low, Nikkei is still down 2.5% and HSI 1.4%. Chinese and U.S. equity indexes are also down by less than a percent. Despite Iran may have downplayed the attack, market participants will unlikely to feel comfortable holding positions over the weekend for fear of a downward spiral. Haven asset are faring better while commodities perform individually. AUD/USD is down by 0.5% at 0.6388 after testing session low at 0.6363, NZD/USD is down 0.35% to 0.5881 while USD/CAD rose 0.07% as the impact is neutralized by higher oil prices. Else, EUR/USD is down 0.05% and GBP/USD down 0.11%.
North American session
The USD was modestly firmer in North America, primarily supported by a bounce in April’s Philly Fed manufacturing index to a 2-year high of 15.5 from 3.2. Initial claims were unchanged and still low at 212k. Comments from Fed’s Williams and Bostic were also USD supportive. A 4.3% fall in March existing home sales was in line with expectations. EUR/USD fell to 1.0645 from 1.0680.
The USD saw similar gains elsewhere, USD/JPY to 154.65 from 154.45, even with a marginal dip after BoJ’s Ueda said a weak JPY could impact inflation and consequently policy.