New Zealand inflation forecasts fall as Japan PPI pain lingers | FXStreet

Asian markets traded with a cautious tone as geopolitical headlines stayed subdued and investors focused on earnings, central-bank expectations, and upcoming US data. New Zealand’s inflation expectations softened notably, while Japan’s producer prices highlighted lingering cost pressures amid a weak yen. Later today brings US July PPI, with July Retail Sales due tomorrow.

Key themes in Asia

• Energy steady: With no new escalation around the Strait of Hormuz, crude held in a narrow $81–83/bbl band over the past day.
• New Zealand: RBNZ’s Q3 survey showed a marked drop in inflation expectations, pushing the outlook toward the midpoint of the 1–3% target range.
• Japan: Temporary yen strength faded, with USD/JPY drifting back toward 160; structural import-cost pressures remain elevated.
• US data watch: CPI met expectations; PPI lands tonight, Retail Sales tomorrow, potentially guiding Fed rate expectations into September.

New Zealand: Inflation expectations ease

The RBNZ’s Q3 Inflation Expectations Survey signaled a cooler trajectory. Two-year expectations fell to roughly 2.34% from 2.53%, while one-year expectations slid to about 2.6% from 3.4%. Markets interpreted the survey as a step closer to the RBNZ’s target midpoint, pressuring the kiwi and nudging two-year yields lower by about 6 bps. Local data also showed softer job ads in July and solid demand at government bond sales.

Japan: PPI and policy path under scrutiny

Japan’s July PPI eased on the month, helped by earlier declines in oil. However, underlying pressures remain sticky, with yen-based import prices still elevated year over year, underscoring the currency’s impact on raw material costs. Despite a brief bout of overnight strength, the yen weakened again, testing the psychologically important 160 level. Interest-rate markets now largely price a 25 bps BoJ hike by October, with rising odds as soon as September.

Earnings and sector moves around the region

• Australia: Telco shares slipped despite higher profits, a dividend lift, and a sizable buyback, as investors weighed subscriber trends and network issues. A major bank advanced on stronger-than-expected Q3 cash earnings.
• Hong Kong/China tech: Core earnings season continues with heavyweights across telecoms, hardware, semis, and retail reporting. One large internet platform fell after revealing another sharp increase in AI capex, even as management voiced confidence in monetization. A leading contract manufacturer swung from early gains to losses; Apple-related revenue share continued to fall as the company prepares AI-server shipments later this year.

Policy, trade, and macro currents

• Geopolitics: A reported high-level call between Japan and Iranian leaders kept attention on energy routes, though market impact remained muted.
• Trade shifts: A US automaker plans to move production of a China-made luxury SUV back to the US. Mexico is pushing for lower auto tariffs in discussions with the US.
• US–China: Reports suggest investment-related talks have stalled ahead of a high-profile leaders’ meeting expected later next month.
• China liquidity: The PBoC conducted no 7-day reverse repo operations for a third straight session, while reiterating a moderately loose monetary stance in its quarterly report. Banks have ramped up capital-raising via Tier-2 paper. A domestic AI model provider announced an upgrade to a flagship model and flagged price adjustments for tokens.

US backdrop

July CPI matched expectations, keeping the inflation narrative largely unchanged. Market-implied odds for a September Fed move edged toward 40%. A large 10-year Treasury auction cleared at the highest yield since 2007, reflecting persistent term premia. Tonight’s PPI and tomorrow’s Retail Sales are the next catalysts for rates and risk assets.

Asia-focused calendar

• Thu: China July New Yuan Loans, Aggregate Financing, and Money Supply; EU June Industrial Production; US July PPI (evening Asia).
• Fri: New Zealand July Business PMI; Malaysia Q2 GDP; Taiwan Q2 GDP; Hong Kong Q2 GDP; EU prelim Q2 GDP and June Trade Balance; US July Retail Sales, Core Retail Sales, and prelim Q3 Atlanta Fed GDPNow (evening Asia).
• Sat: South Korea July Trade Balance.

Regional holidays this week

• Mon: Singapore
• Tue: Japan
• Wed: Thailand

Market snapshot

• Equities (as of 01:20 ET): Nikkei 225 +1.6%; ASX 200 -0.3%; Hang Seng +0.2%; Shanghai Composite +0.4%; Kospi +3.7%.
• US/Europe equity futures: S&P 500 +0.1%; Nasdaq 100 +0.2%; DAX +0.3%; FTSE 100 +0.3%.
• FX: EUR/USD 1.1532–1.1520; USD/JPY 159.49–159.18; AUD/USD 0.7067–0.7045; NZD/USD 0.5870–0.5827.
• Commodities: Gold -0.1% at $4,403/oz; WTI -0.3% at $83.00/bbl; Copper -0.6% at $6.5663/lb.
• Crypto: BTC +0.1% at $63,952.

Outlook

Softening New Zealand inflation expectations and persistent Japanese cost pressures are pulling policy paths in different directions, with markets leaning toward BoJ normalization while the RBNZ gains breathing room. In the near term, US PPI and Retail Sales could shift global rate expectations and risk appetite. Watch for continued yen and kiwi volatility, earnings-driven stock dispersion across Asia, and steady energy markets unless geopolitics re-intensify.