Markets await the Fed’s rate decision

Subdued ahead of FOMC

With the result of the FOMC meeting looming this evening, and a more positive outlook for the restoration of Saudi Arabia’s production facility, it was a relatively subdued Asian morning today. US indices were lower at the margin, with losses of between 0.09% and 0.13% while currencies oscillated in tight ranges.

Trade wars weigh on Japan exports

The trade war between the US and China and a more local one between Japan and South Korea have taken their toll on Japanese trade data. Exports fell 8.2% y/y in August, the ninth consecutive month of contraction and the worst monthly print since January. Breaking down the headline number, exports to China were down 12.1% y/y, those to the US -4.4% and to the rest of Asia -10.9%. The unadjusted trade deficit narrowed to 136.3 billion yen from 250.7 billion yen in July.

In the latest development in the trade spat with South Korea, That neighbour has removed Japan from its list of most trusted trading partners, a move seen in response to Japan’s removal of South Korea from its list of nations deemed safe for the export of strategic materials last month. South Korea’s trade ministry has denied that it was a tit-for-tat move, saying it is meant to improve the country’s control of strategic material exports.

There was only a minor reaction in currency markets, with USD/JPY rising 0.13% to 108.25 while the Japan225 index was unchanged at 22,020. USD/JPY has navigated its way above the 100-day moving average, closing above it on Monday for the first time since May 6.

USD/JPY Daily Chart

Source: OANDA fxTrade

It’s an inflation day

We get to see a slew of UK price data for August today, with PPI, RPI and CPI on the slate. The consumer price index is seen slowing to +1.9% y/y from +2.1% in July while the change in the month-on-month reading is more pronounced, with expectations of +0.5% from 0% the previous month.

Euro-zone consumer prices are also expected to tick higher, with a +0.2% m/m print expected after a 0.5% decline in July. ECB’s De Guindos is also scheduled to speak today.

On the North American calendar, US housing starts and building permits data for August are due before the Fed announces its interest rate decision.

Very early tomorrow morning (Singapore time), New Zealand will publish its second quarter growth numbers. Analysts’ estimates suggest a slowdown to +0.4% q/q from +0.6% and +2.0% y/y from +2.5% in the first quarter.