Ahead Today
G3: US NY Fed 1 -year inflation expectations
Asia:
Market Highlights
The February non-farm payrolls jobs report was somewhat ambiguous. The headline number was strong at +275k, but this came with downward revisions to previous estimates coupled with continued progress in slowing wage growth. The unemployment rate ticked up to 3.9% with the household survey indicating weaker employment growth, while labour force participation rate was maintained at 62.5%.
The market reaction post payrolls also reflected some uncertainty, with lower US yields and equities, coupled with a weaker Dollar. This was coming off a week when the Dollar was generally trending weaker and risk sentiment has been strong so far. Markets are almost fully pricing in a June Fed rate cut. This week’s upcoming US CPI will be crucial in this regard to see if the January price spikes were an aberration or sustained into February, putting a dent into rate cut expectations.
Japan revised its 4Q GDP estimates up to +0.4% from -0.4%, led by stronger business investment spending. The upward revision in GDP could further cement expectations of BOJ scrapping its negative interest rate policy in March, and also comes ahead of the 1st estimates of the Rengo labour union wage negotiations out on 15 March (Friday). On this front, Jiji Press reported that the Bank of Japan is also considering to scrap its yield curve control program, targeting the amount of government bonds purchased instead of the level of yields. USDJPY has now fallen below the 147 level.
Regional FX
Asian FX markets traded stronger against the Dollar, with MYR (+1%), KRW (1.1%), and THB (+0.77%) outperforming. China’s February CPI inflation was higher than expected at +0.7% (vs consensus for a +0.3%yoy rise). Nonetheless, it may be too soon to conclude that weak inflation pressures in China is over, given the Chinese New Year base effects, coupled with the fact that PPI remains weak at -2.7%yoy. Meanwhile, Taiwan’s exports rose further by around 2% over the 1st two months of the year, led by an improvement in electronics exports, coupled with exports to the US. These numbers are in line with some regional improvement in trade, and also led by the AI chip boom and a gradual turn in the tech cycle.
