Today’s key event is the ECB Governing Council meeting. Following the rate cut decided in June, the market expects the policy rate to remain unchanged this time. This meeting will scrutinize whether further rate cuts are necessary. The main point of interest is whether a rate cut in September will be clearly hinted at in the statement or during ECB President Lagarde’s press conference. The ECB has traditionally adopted a “data-dependent” stance, but the June rate cut had formed a consensus in advance. We need to check whether there will be any moves toward September this time as well.
Market Trends
In the market overall, the trend of yen depreciation and dollar appreciation is being reversed. Notably, the yen has rapidly appreciated since last week’s intervention. Amidst the yen’s firm trend due to intervention fears, statements by former President Trump and Japan’s Digital Minister Kono have supported yen buying. Technically, both the dollar-yen exchange rate and the dollar index show a death cross of the 10-day and 21-day moving averages, indicating sell signals.
Impact of the ECB Governing Council
If the ECB Governing Council hints at the next rate cut, there could be further yen appreciation driven by euro selling and yen buying. During the release of the weak US CPI results last week, yen buying intervention was implemented to support the weak results. The intervention amounts are estimated at 3.5 trillion yen on the 11th and 2.1 trillion yen on the 12th.
Key Economic Indicators and Events Today
Hong Kong Employment Statistics (June)
ECB Policy Rate (July)
US Initial Jobless Claims (07/07 – 07/13)
US Philadelphia Fed Manufacturing Index (July)
US Leading Economic Index (June)
South African Reserve Bank Policy Rate (July)
Related Speaking Events
ECB President Lagarde’s Press Conference
Dallas Fed President Logan and San Francisco Fed President Daly attending the Dallas Fed-Atlanta Fed Joint Conference
Trading Strategy
The ECB policy rate announcement and President Lagarde’s press conference. So far, the euro has been bought except against the yen, but if the content leads to euro selling, we would like to ride that trend.
