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📘 BoJ December Rate-Hike Bets Strengthen Further — USD/JPY Maintains Downward Bias

📘 BoJ December Rate-Hike Bets Strengthen Further — USD/JPY Maintains Downward Bias

Focus shifts from “whether the BoJ hikes” to “how global markets and US data will react”

1｜BoJ December rate-hike expectations surge, but the move is largely priced in

In the Tokyo afternoon session, Reuters reported:

“The Bank of Japan is leaning toward a December rate hike, and the government is expected to approve.”

This triggered yen-buying, yet USD/JPY failed to break the intraday low, showing the reaction was limited.

The reason is simple:

  • Governor Ueda already stated
    “We will discuss policy adjustments at the December meeting.”

  • A rate hike is widely priced in across the JGB market

  • The only genuinely new element was the political signal of government approval

➡ Overseas investors’ interpretation tonight is what really matters, and a retest of the 154 handle remains fully plausible.

2｜European session: USD/JPY drop triggered a broad wave of USD-selling

London early trade showed clear yen buying and dollar selling.

  • USD/JPY → fell to 154.80

  • EUR/USD → 1.1677 (daily high)

  • GBP/USD → 1.3359 (daily high)

USD/JPY’s sharp decline spilled over to all USD pairs, prompting:

➡ a synchronized push higher in anti-dollar currencies
➡ a softening in the dollar index

3｜GBP struggles: fiscal concerns cap the upside

The pound initially rose in early Europe, but gains were capped due to:

  • A major US asset manager warning
    “The government’s fiscal projections are overly optimistic”

  • Market chatter that UK 30-year gilt yields could reach 6% within a year

As USD/JPY weakened, GBP/JPY also softened accordingly.

4｜US session spotlight: labor market data is today’s key driver

Following yesterday’s weak ADP (-32,000), today brings a cluster of jobs-related indicators.

If these disappoint, USD/JPY may be pushed back toward 154:

  • Challenger job cuts

  • Initial jobless claims

  • Durable goods (final)

  • Factory orders

➡ Any decline in US yields will accelerate USD selling → USD/JPY downside remains the dominant theme.

5｜European & LatAm data: limited market impact

  • Sweden CPI

  • Swiss employment / PMI

  • UK construction PMI

  • Eurozone retail sales

  • Brazil GDP

  • Canada Ivey PMI

Yesterday’s slightly firmer eurozone CPI does not alter ECB policy expectations.

➡ Market impact expected to be limited.

6｜Central bank speakers: low-impact backdrop

  • ECB: Kocherlakota, Lane, Cipollone

  • BoE: Mann

  • Fed: blackout period → no policy comments

➡ Unlikely to provide directional surprises today.

7｜USD/JPY outlook: Downside bias remains firmly intact

The current macro setup is clear:

✔ BoJ: turning more hawkish (rate-hike bets rising)

✔ Fed: turning more dovish (rate-cut bets rising)

➡ Japan–US rate differential continues to compress → bearish for USD/JPY

Short-term corrective bounces may occur, but the structural trend is shifting toward yen strength.

Key levels

  • Resistance: 155.80–156.20 (sell zone)

  • Support: 154.50 → 154.00 (next downside targets)

With US labor data ahead:
➡ One of these zones is likely to be tested today.

📌 Final Summary (Core Points)

  • BoJ’s December hike is largely priced in — the new element is government approval

  • USD/JPY drop to 154.80 triggered broader USD selling

  • GBP upside capped by fiscal concerns and rising long-term gilt yield expectations

  • Tonight’s US labor data will dictate today’s direction

  • USD/JPY maintains a downside bias, with rallies likely to meet selling pressure

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