Yesterday’s US consumer price index headline was +8.2% year-on-year, which was not much lower than the previous +8.3% and exceeded market expectations. Furthermore, the core year-on-year growth rate unexpectedly accelerated to +6.6%, reaching the highest level in 40 years. It was a strong number that showed how long persistent inflationary pressure would continue.
However, the market stepped up its adjustment movements after the reaction to dollar buying, rising US bond yields, and falling stock prices ran its course. In particular, the rebound in US stocks was rapid, and the Dow Jones Industrial Average showed a solid move to close at 827 dollars. It will be interesting to see how the US stock market moves over the weekend to see if this move is simply a position adjustment due to the immediate run out of material, or if the market is picking up signs of some kind of change in the outlook for US monetary policy.
Looking at the CME FedWatch, the market has almost priced in a 75bp rate hike in November and December. From the beginning of next year, there are different forecasts for the degree of interest rate hike, but it is expected that the pace will gradually decrease to 50bp and 25bp. It is widely believed that the rise will stop at around 4.75% to 5.00% in the first half of next year. However, if sticky inflation continues in the future, we cannot rule out the possibility that it will exceed 5%.
The dollar/yen is stuck at the 147 yen level. Immediately after the announcement, it rose to the 147.67 level, the highest level in 32 years. Immediately after that, there was a sudden drop of about 1 yen, but there is a history of quickly returning to the 147 yen level. Steady lower prices are rising. However, the risk of the Bank of Japan once again intervening to buy the yen is increasing, and the market is currently fluctuating.
With the release of this month’s US employment statistics and US consumer price index, it seems that we have run out of materials. US retail sales (September), US import price index (September), US corporate inventories (August), University of Michigan Consumer Confidence Index (preliminary) (October) released today The response may be somewhat sluggish.
In the London market after this, I would like to pay attention to reports related to the UK. The Bank of England’s temporary purchase of long-term bonds ends today. Subsequent liquidity support measures have also been announced. After that, there seems to be a lot of interest in whether or not the content of the UK medium-term financial plan, which is the root of the impact on the pound’s credibility, will be changed. The pound exchange rate is likely to show nervous movements due to reports of remarks by the British Prime Minister and the British Finance Minister.
U.S. Treasury yields have remained high and are trending downward. Considering this, we assume that USD selling will be easy today. From here to buy AUDUSD earlier.
Also, pay attention to reports related to the UK. Recently, when there is a problem in the UK, the movement tends to spread to other currencies in the form of a strong dollar and a weak euro.