Usd was steady in Asian session as volumes were thin. Majors were range bound for most of the morning with a jolt of risk aversion as news of the latest missile test by North Korea hit the market. Yesterday US data was broadly better then expected giving the Usd a temporary reprieve from selling. However we see this bullish sentiment to have a very short half life. US consumer consumption unexpectedly revised to 2.3% from 1.9% while inflation indicators eased moderately. Markets are still uncertain about how much of the US downbeat economic condition is already priced in to the Usd. However even if a large portion of weakness is already accounted for we believe that when traders will actually see the disturbing data which corresponds with a recession such as negative GDP or Wednesday's durable good orders, the Usd will come under renewed pressure. With BoJ Governor Suda hinting to a possible rate hike yesterday markets were particular interesting in Japan. Inflation pressure was recorded across the board with core CPI hitting 1.0% vs. 0.9% exp. UsdJpy trended down to 99.31 before North Koreas action reversed the downward slide and the market began to price in a lower probability of a rate cut in the next 12 months (from 17bp to 14bp). Nzd and Aud were both strong performers in Asia. New Zealand real GDP q4 increased 1.0% q/q & 3.7% y/y, the strongest quarterly growth since q3 2004. RBNZ Governor Bollard commented that inflation pressures in New Zealand remain relatively strong and the current setting of 8.25% with a flat outlook remains appropriate. Both currencies are still highly coupled with US and Europe growth and commodity prices. In the US the market will be watching Feb income and spending for signals on the health of the consumer and hints to q1 GDP. Retail sales increased moderately which suggests real consumer was stable providing more support that GDP contracted in q1.
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