As we approach the release of the results of tomorrow’s FOMC meeting, the early part of the week is likely to continue with a wait-and-see stance. USD/JPY has risen into the 147 yen range, and trading is consolidating in this range amid mixed buying and selling.
One notable development is the rise in crude oil prices. NYMEX crude oil futures are trading in the $92 range, while Brent crude futures are in the $95 range. This is due to continued production cuts by countries like Saudi Arabia, which are tightening the supply-demand balance in the oil market.
In the recent US Consumer Price Index (CPI) reports, while headline numbers have been rising, core inflation has been slowing down. If the rise in resource prices like oil continues, there is speculation that inflationary pressures could persist for a longer period.
Although expectations for a Fed rate cut are nearly a consensus for tomorrow’s FOMC, if the impact of higher oil prices ripples through the economy, it may push back expectations for the timing of future rate cuts. It will be important to see if there are subtle changes in interest rate outlooks and more.
In addition, a Reuters report yesterday that the ECB plans to discuss ways to deal with excess liquidity soon caused a reaction in the euro market, with signs of euro buying. While this is seen as part of the financial normalization process, it could also give the impression of tightening in the market. However, it’s natural for discussions to be needed in the preparatory stage. It is expected that these discussions will be pushed back to next year.
In the upcoming overseas markets, economic indicators to be released include Eurozone Current Account (July), Eurozone Consumer Price Index (Final) (August), Hong Kong Unemployment Rate (August), Canada Consumer Price Index (August), and US Housing Starts (August).
Regarding speaking events, Elderson, an ECB board member, will attend a meeting, and Deputy Governor Kožički of the Bank of Canada will give a speech. There will also be a $13 billion 20-year US Treasury auction.
The Canadian Consumer Price Index is something to watch. Given the already improved performance of CAD, which has a high correlation with crude oil, I anticipate that it may perform even better after the release of the Canadian Consumer Price Index. If there are entry opportunities, I will consider entering positions.