This week’s foreign exchange market has been dominated by the yen. USD/JPY dropped to around 148.50 during Tokyo morning trading, marking a depreciation of over 13 yen from the high of 161.95 recorded on July 3.
Yesterday was a significant day for the yen. Reports indicated that a rate hike was under consideration at the Bank of Japan (BOJ) policy meeting, and the actual announcement of a rate hike, alongside a reduction in government bond purchases, made a strong impact on the market. BOJ Governor Kazuo Ueda expressed support for the rate hike, reinforcing the market’s perception.
Additionally, while the U.S. Federal Open Market Committee (FOMC) held rates steady, Chairman Jerome Powell hinted at the possibility of a rate cut in September, adding pressure on the dollar. However, the responses in EUR/USD and GBP/USD were relatively muted compared to the drop in USD/JPY, leading to yen appreciation in cross pairs like EUR/JPY and GBP/JPY.
Today, attention shifts to the UK’s “Super Thursday,” with the Monetary Policy Committee (MPC) decision and a press conference by Governor Andrew Bailey. The market has priced in about a 60% chance of a 25 basis point rate cut, amid declining inflation, suggesting that the next move could be a rate cut. The previous meeting resulted in a hold decision, and today’s outcome is keenly anticipated.
The market response to the pound remains uncertain, with particular focus on GBP/JPY movements. The Bank of England’s (BoE) announcement is scheduled.
Today’s overseas market activity will also include key economic data from the U.S., such as the final Manufacturing PMI, Challenger job cuts, non-farm labor productivity, initial jobless claims, construction spending, and the ISM Manufacturing Index.
In terms of speeches, BoE Governor Bailey will hold a press conference following the policy announcement, and Chief Economist Huw Pill will also participate in a Q&A session on monetary policy. Major corporate earnings reports from companies like Biogen, Moderna, Apple, Intel, Snap, and Amazon are also expected.
With high volatility continuing in the yen market, attention remains focused on the BoE announcement.
