Today marks the beginning of a new week and the end of July. Major events such as the US FOMC meeting, ECB Council meeting, and Bank of Japan policy decision have been concluded. It appears that July, overall, will end with a dollar-strong trend.
Both the FOMC and the ECB announced a 25 basis points interest rate hike, but they have taken a data-dependent stance for any further rate actions, which has shifted market attention to post-summer movements. As for the Bank of Japan, there were reports beforehand, but they implemented a flexible (modified) Yield Curve Control (YCC) policy. There were significant market fluctuations before and after the announcement, but ultimately, the yen did not appreciate, and the market opened with a weaker yen at the beginning of the week.
US stocks, mainly led by tech shares, have been firm, and Japanese and Asian stocks also started the week on a positive note. Chinese PMI continued to indicate a slow recovery, but expectations of the Chinese government’s economic support measures provided some support to the stock market. The Bank of Japan’s implementation of “temporary” operations to stabilize long-term interest rates also acted as a positive factor for the stock market.
While market speculations fluctuated due to various pre-event information, overall, it seems that the Bank of Japan’s shock has been effectively digested. This was achieved not solely relying on Kanda, the Vice-Minister of Finance’s strong-arm approach, but through information management by Bank of Japan officials, which led to speculative players’ short-term positions being unraveled.
Considering today is the end of the month, unexpected price movements are more likely due to rebalancing. The general approach should be to observe the situation cautiously.
