Asia Morning Bites

After the Fed, attention now shifts to the BoJ tomorrow and ECB later today.

Global Macro and Markets

• Global markets:  US equities didn’t hate Jerome Powell’s message last night at the FOMC following the latest 25bp rate hike. But they didn’t love it either. That probably suggests Powell got it about right in terms of the overall tone. (see our detailed note here). The door is left wide open for more hikes, the question is, will they actually deliver?  

  The S&P 500 was down just 0.02%, while the NASDAQ fell only 0.12%. Practically flat on the day. Chinese stocks were a bit more subdued also, maybe figuring that the earlier Politburo comments were more hot air than cold cash, and the CSI 300 drifted 0.21% lower, while the Hang Seng index fell 0.36%. US Treasury markets clearly felt that they were appropriately priced for the FOMC message, and 2Y yields came off just 2.3bp, while the 10Y dropped just 1.8bp to 3.867%. These slight yield reductions enabled the EUR to claw a little ground back against the USD, and EURUSD rose to 1.1083. Other G-10 currencies – GBP and  JPY made gains against the USD, though the AUD lost some ground after their June inflation figures, which on the whole, could have been better even though they did show inflation still dropping (see our note here for more detail).

  Asian FX had a mixed day. The CNY has begun to drift weaker again after its Politburo-induced strengthening earlier. But there were some positive outcomes from the THB and MYR.

• G-7 macro:  After the FOMC excitement, which turned out not to be so exciting after all, it’s the turn of the ECB today. Here’s a cheat sheet from our European economists, rates and FX strategists, who think that they may veer towards a more data-dependent strategy after this meeting, which could be viewed as a slightly dovish tilt and lead to a weaker EUR.

  On top of that, we also get Advance 2Q GDP from the US, with a consensus view of 1.8%QoQ annualized growth – only slightly down from 2.0% in 1Q23. Any upside surprise is likely to see bond yields pushing higher again.

• China: Industrial profits data for June will not likely buck the trend of other weak data. Industrial production growth remained weak in June, while producer price inflation turned more negative. So a  further dip from May’s -12.6%YoY outcome seems possible.

What to look out for: ECB and BoJ

• China industrial profits (27 July)

• ECB policy decision (27 July)

• US personal consumption, durable goods orders initial jobless claims (27 July)

• South Korea industrial production (28 July)

• Japan Tokyo CPI and BoJ policy (28 July)

• Australia PPI (28 July)

• US personal spending, core PCE, University of Michigan sentiment (28 July)