3 min to read
USDJPY Sees Adjustment to 140 Range ahead of Crucial FOMC Meeting
with Speculations on Market Consolidation.
“USD/JPY Retracts to the 140 Range amid Anticipation of Tomorrow’s FOMC, Speculation on Consolidation”
In today’s New York foreign exchange market, the USD/JPY experienced a slight retreat, dipping into the 140 range due to selling pressure. The prevailing market sentiment centers around the eagerly awaited Federal Open Market Committee (FOMC) meeting scheduled for tomorrow, which is likely influencing the recent consolidation of dollar buybacks.
Expectations are high that the FOMC meeting will result in a 0.25% interest rate hike. However, this widely anticipated move has already been factored into the market, prompting investors to closely scrutinize any hints provided by the Federal Reserve regarding the next FOMC meeting in September. Federal Reserve Chairman Jerome Powell has previously emphasized the potential for two more rate hikes in the future, and this stance is expected to remain consistent. Nevertheless, given the two-month data window before the September meeting, the Federal Reserve may adopt a more flexible and transparent approach this time.
Against this backdrop, there is a growing belief that the US dollar will maintain its strength even after the FOMC rate hike. Besides the FOMC, the European Central Bank (ECB) and the Bank of Japan are also making critical decisions on their respective monetary policies this week. The FOMC and ECB are both expected to raise interest rates by 0.25 percentage points, while the Bank of Japan is likely to maintain its accommodative stance.
The financial system currently appears stable, and long-term inflation expectations continue to surpass the trend. Barring any significant economic shocks, it is widely believed that the Federal Reserve will maintain a cautious, high-interest-rate environment for an extended period. Consequently, even as the rate hike cycle may conclude later this year, the US dollar is anticipated to retain its resilience.
Meanwhile, the EUR/USD has undergone a moderate retracement due to selling pressure but has managed to sustain its position in the mid-1.10 dollar range. Today, the euro briefly dropped to around 1.1020 dollars and dipped below the 21-day moving average, sparking caution among investors about potential breaches of the 1.10 dollar level following the outcome of tomorrow’s FOMC meeting.
This week also includes the scheduled ECB Governing Council meeting, where a rate hike is anticipated. Market focus, however, is on developments that may unfold in September. In the short-term financial market, the probability of a rate hike in September is currently evenly divided. However, if a rate hike does occur, it is widely expected to mark the end of the current rate hike cycle, with the central bank deposit rate likely to reach 4.00%.
Regarding the GBP/USD, it witnessed a rebound during the New York session, reaching around 1.2865 dollars, as it strives to break its prolonged losing streak that dates back to March 2020. The 21-day moving average is currently approaching the mid-1.28 dollar level, showing signs of recovery and a temporary halt at the 1.28 dollar mark.
Following the release of UK PMI data the previous day, expectations for a significant rate hike at the upcoming Bank of England Monetary Policy Committee (MPC) meeting have diminished. Some market participants are expressing concerns about a potentially less hawkish policy update.
Currently, the short-term financial market widely anticipates a 0.25% rate hike, but there is an approximately 44% probability of a more substantial 0.50% rate hike. As economic analysts, it is crucial to closely monitor these developments and consider their potential impact on the global economic landscape.
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