In the foreign exchange market at the beginning of the week, the dollar exchange rate remained high. The dollar/yen exchange rate was pushed down to around 142.65 at times, but is currently holding steady at the 143 yen level. After temporarily buying around 1.0029, the euro/dollar broke parity again and softened to the 0.9980 level. Although the price has fluctuated since the end of last week, the dollar remains strong.
The short-term money market has fully factored in the 75bp rate hike at the US FOMC this week. The degree of incorporation is stable at around 80% for 75bp and around 20% for 100bp. The fact that the latest inflation data did not provide as much evidence of peaking out as the market had expected has strengthened the prospects of continued large rate hikes.
At the beginning of the week, remarks related to US President Biden were reported. Regarding the Taiwan issue, the US military announced that it would defend Taiwan in the event of an unprecedented attack. I got a little nervous. On the other hand, ahead of the midterm elections, he proclaimed an end to the pandemic, kept inflation in check, and gave a optimistic outlook for a soft landing for the U.S. economy.
After this, overseas markets will be closed in the UK for the state funeral of Queen Elizabeth. With few participants and a lack of new materials, price movements are likely to continue under strong dollar pressure.
Due to the wait-and-see mood before the FOMC, it is assumed that the market is likely to move into a range today.
