The reaction to Kanda, the Ministry of Finance official, and the main opinions of the Bank of Japan appears to be relatively muted. However, it is worth noting how the overseas markets will respond. At the beginning of the week, there was a slight strengthening of the yen. This can be attributed to Kanda’s remarks cautioning against excessive yen depreciation and the indication from the Bank of Japan’s policy meeting that inflation remains persistent. Nonetheless, the USDJPY pair has only experienced modest adjustments within the 143 yen range, and the correction from the levels of yen depreciation seen last week has been relatively small. It is important to observe whether there will be further adjustments to the previous yen depreciation trend in the international markets.
As for economic indicators, the release schedule is relatively light, with only the German Ifo Business Climate Index (June) scheduled. The market forecast expects a decrease from the previous reading of 91.7 to 90.6. The flash PMI figures for France and Germany released last week showed a more significant decline than expected, which has led to market uncertainty regarding the economic outlook in Europe and a risk-off sentiment. While there are persistent speculations about the possibility of additional rate hikes by the European Central Bank (ECB), the market has been more reactive to economic trends than interest rate differentials. It will be interesting to see the market’s reaction to today’s Ifo Business Climate Index.
Regarding speech events, the ECB Forum on Central Banking, focused on “Stabilizing Macroeconomic Management in an Uncertain Inflation Environment,” is set to take place from today until the 28th. Christine Lagarde, the President of the ECB, will deliver the opening remarks. It is expected that she will address the situation of monetary tightening aimed at combating inflation and its contrasting effect on the economic situation in Europe.
Other notable events include speeches and participation in events by François Villeroy de Galhau, Governor of the Bank of France; Dave Ramsden, Member of the Monetary Policy Committee of the Bank of England; Thomas Jordan, Chairman of the Swiss National Bank; and Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank. Additionally, there is a scheduled auction of $42 billion worth of 2-year Treasury notes in the United States.
Considering the repeated remarks cautioning against excessive yen depreciation from the Bank of Japan, it is anticipated that surpassing the current USDJPY high around 144 yen will be difficult, and a sense of caution is likely to prevail. Therefore, starting with a sell position on USDJPY is recommended for today.
