Today, the results of the US Federal Reserve (FOMC) meeting will be announced. The market has already largely priced in the expectation that the policy interest rate will remain unchanged. The focus is on the interest rate forecasts of FOMC members and the subsequent press conference by Chairman Jerome Powell. Currently, energy prices such as crude oil are rising, and the seeds of future inflation seem to be reigniting. Market sentiment is leaning somewhat towards preparing for inflation.
Tomorrow, the Bank of Japan (BOJ) will hold its monetary policy meeting. Attention is on BOJ Governor Haruhiko Kuroda’s handling of the meeting. It is likely that he will gradually communicate a move towards an exit strategy while maintaining the basic policy of monetary easing. In addition, there is a market view that intervening to prevent yen depreciation could be effective in extending the easing measures, and the movement of the USD/JPY exchange rate is being closely watched. Finance Minister Kanda has emphasized that communication between Japanese and US financial authorities is close, suggesting that exchange rate intervention for volatility control is tolerated. It should be noted that from today until the beginning of next week, the market could become quite volatile.
In the current market, the sharp decline of the pound is noticeable. It reacted to the August UK Consumer Price Index, which came in below expectations. Year-on-year growth remained at 6.7%, falling short of the expected 7.0%. Core year-on-year growth also stood at 6.2% compared to the expected 6.8%. As a result, the GBP/USD pair dropped from the high 1.23s to the low 1.23s. However, as it is ahead of the FOMC meeting in the US, the spillover of dollar buying pressure to other major currencies has been limited. USD/JPY’s rise has been capped around the 147.96 level.
In the upcoming international markets, economic indicators to be released include the South African Consumer Price Index for August, Eurozone Construction Output for July, South African Retail Sales for July, and the US MBA Mortgage Applications for September 9-15, among others. In the early hours of tomorrow, the Brazilian Central Bank’s policy interest rate announcement is also scheduled.
Regarding speaking events, ECB Executive Board Member Elderson is scheduled to participate in an event. Subsequently, events such as the US Weekly Petroleum Inventory Statistics and the release of the Bank of Canada’s meeting minutes for September 6 will follow. The focus will then shift to key events like the FOMC statement, economic projections, and Federal Reserve Chairman Jerome Powell’s press conference.
USD/JPY tested the 148 yen level but faced selling pressure and returned to the 147 yen level. The market will closely watch whether it will update its high after the FOMC today.