Yesterday, the dollar/yen exchange rate fell to the 143 yen level after trading close to 145 yen. This week’s rapid appreciation of the dollar and depreciation of the yen were adjusted. Two major events are scheduled for today, the ECB Governing Council meeting and the speech by FRB Chairman Jerome Powell. Today’s event is getting a lot of attention.
At the ECB Governing Council, expectations for rate hikes are split between 0.50% and 0.75%. All of these are significant interest rate hikes compared to the normal pace. Given that the headline inflation rate is at a high level of 9.1%, measures to curb inflation are essential. It seems that the BOJ may want to close the gap in the pace of interest rate hikes with the US as soon as possible. On the other hand, the unstable supply of gas produced in Russia has led to growing concerns about an economic recession in Europe due to energy shortages in winter and soaring prices. The 0.75% rate hike is a little more likely, but recently, the 0.50% rate hike is also making a comeback. Either outcome is likely to have a strong reaction in the euro market.
Following the ECB’s policy interest rate announcement and Governor Lagarde’s press conference, FRB Chairman Powell will participate in a meeting on monetary policy. It will be a message to the market just before the blackout period ahead of the US FOMC meeting on the 21st. There will be a Q&A session, and it is likely that there will be questions about the pace of interest rate hikes. However, after the Jackson Hole speech delivered a strong message that interest rates will continue to be raised until inflation is contained, it is questionable whether further new material will be provided. Markets are likely to be nervous given the timing right after the ECB Governing Council meeting.
Today’s ECB Governing Council meeting is expected to continue in a range trend for the EUR if it goes as expected. JPY continues to sell.