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The USDJPY experienced minor fluctuations
primarily hovering around the 1.50 mark.
“In today’s New York foreign exchange market, the USD/JPY experienced minor fluctuations, primarily hovering around the 1.50 mark”
While the USD/JPY maintained its overall position in the mid-1.49 range, a subtle resurgence in buying activity emerged during the New York trading session. The preceding day had witnessed a brief surge in the yield of 10-year US bonds, momentarily breaching the 5% threshold before retracing swiftly to the 4% range. This caused a temporary pause in the upward movement of the USD/JPY. The 5% yield mark for the 10-year US bonds is perceived as a transient peak, prompting interest in value-driven acquisitions characterized by yield reduction.
The USD/JPY has remained in lockstep with the rising US bond yields, a principal underpinning factor. Notably, it has shown resilience against any marked depreciation, maintaining its stance around the 1.50 level. The outlook for the forthcoming FOMC meeting, scheduled for next week, remains unaltered. It is widely anticipated that the Federal Reserve will maintain the status quo, despite market sentiment suggesting that Fed Chair Powell is contemplating the prospect of additional rate hikes.
In another sphere of focus, the Bank of Japan’s impending meeting has garnered notable attention, with significant revelations emanating during the London trading hours. Discussions have arisen regarding the potential necessity for an adjustment of the Yield Curve Control (YCC) framework. While the Bank of Japan maintains that even if YCC were to be adjusted, its impact on the Japanese economy would be limited, there are internal concerns within the bank regarding the prospective risks associated with raising the upper limit, which could lead to sustained increases in bond yields.
Many believe that should the momentum behind the surge in US bond yields subside, further adjustments to the YCC may prove unnecessary, subsequently stabilizing Japan’s long-term interest rates. Presently, US bond yields have retreated from the 5% range, with a prevailing notion that the 5% range could represent a transient peak, engendering caution about the potential for additional yield increases. Consequently, the stance taken by the Bank of Japan in this context remains subject to vigilant scrutiny.
During New York trading hours, the EUR/USD saw a decline, dipping into the 1.05 dollar range. There were instances of short-covering driving temporary surges, briefly elevating it to the upper 1.06 dollar range. The release of Eurozone PMI data today, which fell below expectations, contributed to the pressures exerted on the EUR/USD’s upside. This week’s ECB council meeting is unlikely to yield any significant policy decisions, given the uncertainties surrounding fiscal reforms in the Eurozone, mounting yields, and widening spreads among sovereign bonds across European countries.
However, it is widely expected that the ECB will retain its existing guidance concerning the reinvestment of maturing bonds. Nevertheless, there are prospects for discussions regarding the early reduction of reinvestments in bonds held under the Pandemic Emergency Purchase Program (PEPP). It is believed that the current phase of the financial policy cycle has achieved a more balanced equilibrium, addressing the risks of both excessive tightening and inadequate tightening.
The GBP/USD faced challenges in making substantial gains today within the 1.21 dollar range. Following a decline earlier in the day, it dipped below the 21-day moving average, raising questions about the potential for a rebound market and intensifying the scrutiny of its upcoming movements in the days ahead. The UK’s Office for National Statistics released experimental data covering employment statistics from August to October, revealing a loss of 82,000 jobs in the United Kingdom. Nevertheless, the unemployment rate remained at a low level of 4.2%, hinting at a labor market that is slightly tighter than previously anticipated. These calculations employ an experimental methodology that incorporates new data on tax revenues and declarations.
Last week, it was reported that average wage growth (excluding bonuses) from August to October increased by 7.8% compared to the previous year, marking the first decline in the growth rate since January. In contrast, the Consumer Price Index (CPI) for August and September exhibited a year-on-year increase of 6.7%, surpassing the growth in wages. Nonetheless, the market’s outlook for the Bank of England remains unaltered, with expectations favoring a monetary policy freeze at the forthcoming Monetary Policy Committee (MPC) meeting scheduled for November 2nd. This sentiment is rooted in recent economic reports signaling a weakening economic landscape in the UK, exemplified by figures related to retail sales and inflation.
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