Market to Speed up Asian Unwinding

It seems that the post EU summit euphoria has completely unwound in most equity markets, but not enough in FX. All week long analysts have been pointing out that that Asian currencies or their indexes remain somewhat firm against the USD and particularly so against the EUR than before the EU summit. China this week brought forth a few surprising data points that certainly has the longer term investor community worried. The traders job is to unwind, speeding up the pace, these regional currency gains as the market increasingly refocus on Asia’s deteriorating cyclical growth fundamentals. Koreas surprise rate cut this week has seen many investors wade to the sidelines. Apparently their decision was not unanimous and it was preemptive in response to rising external growth risks, and the weaker than expected domestic recovery just like in Brazil, ECB and PBoC.

Below are some other highlights of the week:


  • CNY: Premier Wen said over last weekend that downward pressure on the economy is still “relatively large” and that the government will intensify the “fine-tuning of policies even as measures taken over the last three-months help stabilize this slowdown.” Trade and Growth data this week should have provided a better indication on how much more PBoC short term easing will be required.
  • CNY: Chinese June CPI rose +2.2%, y/y, below the consensus forecast for a +2.3% rise. On a month-on-month basis, the CPI fell -0.6%, dragged down by a fall in food prices.
  • JPY: Japan’s current account surplus narrowed in May (+62.6%, y/y, to +Â¥215.1b, compared with +Â¥333.8b in April). Digging deeper, machinery orders (-14.8%, m/m, in May) fell the most in more than five-years.
  • JPY: Bank lending rose +0.7%, y/y, in June compared to a revised +0.2% earlier, while lending excluding trusts was up +0.8%, y/y, following the +0.4% increase in May.
  • PHP: Philippines CBank tightened regulation on its special depositary account (SDA) facility.
  • NZD: Kiwi ANZ job advertisements survey fell -1.2%, m/m, in June, a third consecutive monthly fall. The index fell -2.6% in May.
  • CNY: Chinese data continues to soften. Their imports slowed down from +12.7%, y/y, in May to +6.3%, y/y, in June, while exports rose faster than expected at +11.3% compared to +15.3% in May. Their exports continue to outperform all countries in Asia, barring the Philippines and Thailand.
  • NZD: The Kiwi REINZ house price index rose +0.3%, m/m, in June to the highest level in four-years.
  • AUD: The NAB Monthly Business Survey business conditions rose +3 points to -1 in June. However, the confidence index dropped to -3 in June, compared with -2 in May.
  • PHP: The Philippines’ exports rose by +19.7%, y/y, to +\$4.93b in May, a 17-month high, compared with +\$4.64b the previous month. There was a sigh of relief that electronic exports rose +10%, m/m.
  • CNY: Chinese Premier Wen said that promoting investment growth is key. He said stabilizing economic growth is both a pressing priority now and a long-term task.
  • AUD: Aussie Westpac consumer confidence rose +3.7% to 99.1, a strong month-on-month rise, albeit from a low base. Separately, the number of home loans declined -1.2%, m/m in May, while investment lending fell by -4.6% in the same month.
  • MYR: Broad based gains were seen in Malaysia’s IP. It rose +7.6%, y/y in May, versus +4.6% consensus and up from +3.2% in April.
  • KRW: South Korea’s bank lending to households rose by +KRW1.3t in June to +KRW 457.1t. The money supply expanded in May, with M2 rising +0.3% after a +0.6%, m/m gain in April. The unemployment rate remained steady at +3.2% last month.
  • JPY: Japan’s tertiary industry index posted the first rise in five-months on solid demand for cars, up +0.7%, m/m in May, compared with a revised -0.2% in April.
  • JPY: Japan’s M2 money stock was up +2.2%, y/y, in June, the same as the revised figure in May. Also M3 money stock was up +2.0%for the same month, following an increase of +1.9% in May.
  • BoJ: Japanese policy makers have increased the size of its AP fund by +Â¥5t and reduced the maximum limit of the credit loan program by -Â¥5tn. Because the credit program has been undersubscribed, this implies a net expansion of the BoJ’s balance sheet. This decision is consistent with continued monetary easing by a steady expansion of the AP program.
  • AUD: Aussie employment fell by-27k last month, much weaker than the consensus forecast for no change. Even the details were an eye sore. Full-time employment fell-33.5k, reversing the-36.4k rise in May, and what’s turning into being a new global phenomena, the participation rate also fell for the month. Analysts note that for Q1 as a whole, employment rose by a subdued +14k, while full-time employment dropped-10k. Bring back the Aussie economy of old!
  • KRW: Easing cuts by the ECB and PBoC has left its mark on South Korea. The BoK lowered its policy rate by-25bps to +3%, surprising the consensus forecast for no change. Apparently the decision was not unanimous and it was preemptive in response to rising external growth risks, and the weaker than expected domestic recovery.
  • BRL: In Brazil, the Copom cut the Selic rate by-50bp to +8.00%, and the following communiqué was in line with the most recent statement, with the difference that it was an unanimous decision, whereas one member of the Copom had dissented at the May meeting.
  • IDR: The Bank of Indonesia left rates unchanged at +5.75% as expected.
  • NZD: Kiwi PMI fell sharply to 50.2 in June from 55.8 in May, matching the move lower in the June NBNZ survey. Declines were broad based across subindices with employment falling below 50 for the first time in nine-months.
  • CNY:There was general market relief after China’s Q2 GDP grew +1.8%, q/q, vs. expectations for +1.6%. All week investors had been preparing for a softer number. However, Q1 growth was revised down to +1.6% from the previous estimate of +1.8%. On balance, Q2 year-on-year growth was a tenth below the consensus at +7.6%. Other releases saw fixed-asset investment grow at +20.4%, y/y, in June, and retail sales grow at +13.7%. IP rose +9.5%, y/y in June.
  • SGD: Singapore’s economy unexpectedly contracted in Q2 as the GDP fell by -1.1%, q/q, annualized, vs. consensus for a +0.6% gain. This followed the massive +9.4%, q/q, expansion in Q1, revised down from +10% previously. Analysts note that much of this related to weakness in the volatile biomedical sector of manufacturing.
  • KRW: Export prices rose by +2.2%, y/y, in June, slowing from a +3.2% gain in May. The import price index saw the first annual decline in two years, falling by -1.2% in June, following a +2.1% gain in May.
  • PHP: The central bank of the Philippines cut interest rates on special deposit accounts to reduce inflows into the peso.






  • Retail Sales comes to us from USD and GBP
  • Inflation indicators are delivered from NZD, GBP, USD and CAD
  • AUD and GBP both release their respective MPC meeting minutes
  • The BoC presents CAD’s rate announcement
  • EUR has German ZEW economic sentiment to contend with
  • Both GBP and USD has unemployment claims to ponder
  • Building and Home sales data is released in the US
  • The week finishes with USD Philly Fed index


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell