Forex markets saw a small degree of follow through for the US dollar upmove during the session here today. Ranges were small compared to the huge swing higher for the dollar on Tuesday in US time as Powell shifted a little more hawkish. Regional stocks declined, as you’d expect.

Contrasting with Powell’s move Reserve Bank of Australia Governor Lowe spoke today following his shift to a touch less hawkish at yesterday’s monetary policy decision. If you recall it was an as expected +25bp rate hike with a softer tone in the Statement. Lowe elaborated on this less hawkish tone in today’s comments. In summary (this from earlier):

  • Lowe has pointed out that the data on jobs, retail spending, business surveys, along with PCI, are all important considerations. If those data suggest a pause is needed then the Board will pause its rate hikes. If not, then it'll be another hike. Lowe said more aggressive rate hikes were considered and that this would bring CPI back closer to target prior to 2025 the bank currently forecasts, but this would come at a big cost in unemployment.
  • Also, total required mortgage payments are expected to reach around 9.5% of household disposable income as fixed rate loans roll off and refinanced. This would be close to a record high and would trim demand in the economy.

On the data front we had Japan recording a record current account deficit, and trade deficit, in January. The global slowdown and China's Lunar New Year holidays were cited in reasons. As a consolation prize, the primary income balance, another element of the current account, rose 350 bn yen from a year earlier to a 2.29 trillion yen surplus in January, driven by higher interest payments received from its investment in foreign securities.

News flow otherwise was very light indeed.

Asian equity markets:

  • China’s Shanghai Composite -0.5%

  • Hong Kong’s Hang Seng -2.5%

  • South Korea’s KOSPI -1.4%

  • Australia’s S&P/ASX 200 -2%

usdyen wrap chart 08 March 2023