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The USDJPY market today prominently displayed a prevalent pattern of profit-taking
causing the currency pair to recede into the lower 147 yen range.
“The USD/JPY market today prominently displayed a prevalent pattern of profit-taking, causing the currency pair to recede into the lower 147 yen range, down from its prior position around 147.70 yen”
While the overarching sentiment continues to favor the US dollar, we observe a discernible deceleration in its upward trajectory, likely stemming from traders securing their profits.
Currently, market participants are harboring mounting concerns regarding the Federal Reserve’s (FRB) monetary policy direction and the potential for further interest rate hikes in the latter part of this year. In light of the recent robust economic indicators emanating from the United States, there is a growing conjecture that the FRB might exploit these robust data points as grounds for justifying additional rate hikes. The release of the most recent US initial jobless claims data further underscores the robustness of the labor market.
Analytical voices suggest that, given the prevailing robustness of the US economy, the FRB is poised to adopt a more hawkish posture at the upcoming Federal Open Market Committee (FOMC) meeting later this month. Although short-term financial markets are currently factoring in a high likelihood of no policy change in September, the probability of an additional rate hike occurring in November has surged to over 40%.
Conversely, the EUR/USD pair has encountered slight downward pressure, drifting into the 1.26-dollar range and surpassing the 200-day moving average. The market’s attention is now firmly affixed to the imminent European Central Bank (ECB) meeting scheduled for next week. While the prospect of further interest rate increases remains on the table, short-term financial markets are estimating an approximate 35% probability of a 0.25% rate hike.
Certain experts are speculating that the ECB might opt for an extended period of maintaining elevated interest rates while underscoring that the tightening cycle may not have reached its conclusion. The forthcoming meeting could provide signals of a transition toward an accelerated process of quantitative tightening (QT) while holding interest rates steady.
Against this backdrop, the GBP/USD pair briefly dipped into the mid-1.24-dollar range, amid the prevailing backdrop of the persistent strength of the US dollar. Concerns have arisen regarding the prospective policy actions of the Bank of England (BoE), especially following Governor Bailey’s recent assertion that the interest rate cycle is approaching its zenith. Some market participants interpret Bailey’s statements as indicative of a pause in the rate hike trajectory.
In this context, there is a mounting speculation that the BoE might temporarily suspend rate hikes in November. The central bank had recently executed a 0.25% rate hike on September 21st, prompting expectations of the conclusion of the present rate hike cycle.
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