Morning Brief – Await earnings

The major moves in the FX market continued during the Asian session, as the greenback continued to sell off ahead of the FOMC policy meeting last week.

Besides FX, the stock market moves in Asia were quiet as traders and investors awaited a raft of earnings data from the US later today and this week.

Most of the focus during the Asian session was on comments from the Bank of Japan Governor Udea, ahead of the BOJ meeting this week, and South Korean GDP.

South Korea’s economy expanded 0.3% QoQ in the three months to March 2023, following a 0.4% contraction in the previous quarter, which marked the first contraction since the second quarter of 2020.

On the expenditure side, private consumption went up by 0.5% (vs -0.6% in Q4), as expenditures, consumption edged up 0.1% (vs +2.9% in Q4), as expenditures on social security benefits increased, despite a decrease in expenditures on goods.

Bank of Japan Governor Ueda was also speaking from the Japanese parliament today. He noted that it is appropriate to maintain YCC and easy monetary policy given current economic, price, and financial developments.”

He also said that Japan’s bond yield curve is currently smooth as a whole and “if wages and inflation rise more than expected the Bank of Japan will tighten monetary policy, such as by increasing interest rates.”

On inflation, he said, “below 2% but gradually accelerating, which is partly due to effect of monetary easing” and “We see risk of inflation undershooting forecast as bigger than the risk of overshooting, which is why BOJ must maintain easy policy now.”

On policy he said, “Monetary policy steps taken now will affect the economy, prices half-year, 1 year, 1.5 years ahead” and “Tightening monetary policy now could push down inflation in future, which is already likely to slow on the dissipating effect of import costs.”