3 min to read
The dollar's initial upswing relinquished its fervor,
leading to profit-taking within the USD/JPY pairing.
“In the aftermath of the Federal Open Market Committee (FOMC) meeting, the dollar’s initial upswing relinquished its fervor, leading to profit-taking within the USD/JPY pairing.
Today, the USD/JPY grappled with downward pressure as the New York trading session commenced, descending to approximately 147.30 yen. The previous day’s dollar surge in the wake of the FOMC meeting seemed to have momentarily stalled, giving rise to evident profit-taking within the dollar-yen dynamic. Investors are now keeping a close watch on the 21-day moving average, currently hovering around the 147 yen mark, viewed as a proximate support level. However, there are currently no strong signals pointing to a substantial downturn at this juncture.
The market sentiment has assumed a more hawkish tone subsequent to the recent FOMC meeting. While the prospect of one more rate hike before year-end has been floated, the outlook for rate reductions next year has been tempered compared to the earlier projections made in June. The Federal Reserve’s steadfast commitment to a policy of “higher for longer” interest rates remains intact, underscored by their unwavering vigilance toward inflation, a point emphasized during the meeting.
Against the backdrop of the ongoing strength in oil prices, there is a prevailing sense that the energy rally may endure for an extended period. Heightened scrutiny is directed at the potential spillover effects on core inflation, further adding to the Federal Reserve’s caution.
Furthermore, tomorrow’s agenda includes the Bank of Japan’s policy meeting. Although the consensus leans toward maintaining the status quo, all eyes are on Governor Kuroda’s forthcoming press conference. Recent market volatility stemming from Governor Kuroda’s comments following his interview has led to substantial yen appreciation. Nevertheless, it appears that there may have been a disconnect between his statements and the market’s interpretation. Consequently, clarification of his intentions is highly anticipated.
During the New York trading session, the EUR/USD observed some buy-side activity. While the overall downtrend remains unaltered, and concerns regarding overextension persist, market sentiment leans toward continued exploration of lower price levels.
Tomorrow will herald the release of the preliminary September PMI data for the Eurozone. Amid escalating uncertainty concerning the economic trajectory within the Eurozone, it is foreseen that corporate sentiment will persist in a restrained atmosphere. The preceding month saw the services sector falling below the pivotal 50-point threshold, and it appears that this month’s data might once again insinuate the potential for an economic deceleration, particularly in conjunction with the manufacturing sector.
The GBP/USD pairing initially underwent a descent to the vicinity of 1.2240 dollars but staged a recovery during the New York session, briefly touching the 1.23 dollar threshold.
Today, the Bank of England’s Monetary Policy Committee (MPC) convened and resolved to maintain existing interest rates. While the decision did entail some mild surprise, it appears that the previous day’s release of the UK Consumer Price Index (CPI) influenced the central bank’s stance, postponing an imminent rate hike. Governor Bailey of the Bank of England also referred to this rationale. Nonetheless, it is noteworthy that the MPC’s voting outcome was a narrow 5-4 decision. The prospect of further rate hikes has not entirely dissipated, with short-term financial markets currently pricing in a 75% probability of one rate hike occurring by the first quarter of the coming year.
However, in response to today’s Bank of England decision, voices have emerged advocating for a rate cut. Some conjecture that the Bank of England is likely to be the first major central bank to initiate such a move. The UK’s domestic economy has indeed encountered a marked deceleration, with even the hitherto robust labor market now exhibiting indicators of a typical economic downturn. Nonetheless, robust wage growth continues, and the potential for secondary effects on inflation remains a pertinent consideration.
Significantly, Governor Bailey has unequivocally stated that the timing for considering a rate cut remains premature at this juncture.
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