Asia Morning Bites - 09.02.2023| FXMAG.COM

Taiwan's inflation this afternoon and US initial jobless claims to chew on tonight. More Fed speakers are scheduled, but markets are currently not paying them much attention

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Macro outlook

Global Markets: US stocks don’t seem to know which way to turn currently, and after Monday’s fall and Tuesday’s rise, Wednesday saw them falling again. There was nothing of note on the macro calendar, but a slew of Fed speakers kept up a hawkish background hum, which was probably the main cause of the falls. The S&P 500 fell 1.11%, and the NASDAQ fell 1.68%. Chinese stocks were down slightly, the HSI just barely lower by 0.07% and the CSI 300 down 0.44%. FX was quite whippy on Wednesday. EURUSD rose to 1.076 at one point but gave that all back to settle slightly lower at 1.0715. The AUD performed a similar set of acrobatics but finished close to where it started and is currently 0.6926. Cable actually performed a little better, the pound climbed up above 1.21 vs the USD, and though it too drifted lower, maintained a level of 1.2070. The JPY is at 131.34, slightly weaker than this time yesterday. Other Asian FX delivered a mixed bag, with the SE Asian currencies mainly stronger against the USD, but the more continuously traded currencies slightly softer. We will probably see some convergence with the SE Asian currencies coming more into line with their Northern peers this morning. US Treasury markets have gone back into “ignore the Fed” mode. 2Y US Treasury yields fell 4.4bp while yields on 10Y bonds fell 6.4bp to 3.61%.
G-7 Macro: Preliminary German CPI for January is released today, and the consensus expects it will rise back up to 8.9% from 8.6% YoY in December. There is nothing else on the Macro calendar except for a couple more Fed speakers – Kashkari and Waller. So the hawkish tone should continue through today too. Markets may continue to ignore it ahead of next week’s CPI release.
China: Loan data released between 9 Feb and 15 Feb should show a jump in new yuan loans to over CNY 4 trillion. This is a seasonal phenomenon. Chinese banks usually book loans at the beginning of the year. Any amount over CNY 4.37 trillion will suggest strong loan demand from corporates that expect a strong recovery in the economy.
Taiwan: CPI inflation should be stable at around 2.7%YoY with WPI expected at around 5.3%YoY from 7.14%. In theory, this set of data should give Taiwan’s central bank an option to pause from March 2023. The downside of this would be a widening interest rate differential, which could induce portfolio capital outflows. In that case, the central bank could choose to just follow the Fed's hikes with small steps of 12.5bp from the current level of 1.75%. This would put extra pressure on the economy as we expect the semiconductor industry in Taiwan to experience a downward cycle in 1H23. This should result in a mild recession in Taiwan's economy in the same period. As such, the March meeting will be a difficult decision for Taiwan’s central bank.

What to look out for: US initial jobless claims and Taiwan inflation data

Taiwan CPI inflation (9 February)
Japan machine tool orders (9 February)
US initial jobless claims (9 February)
Japan PPI inflation (10 February)
China CPI inflation (10 February)
Malaysia GDP (10 February)
US University of Michigan sentiment (10 February)
Fed’s Waller and Harker speak (10 February)

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