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The USD/JPY pair maintains its upward trajectory
regaining the critical 142 yen level during NY trading and briefly surging towards 142.70 yen.
“USD/JPY Consolidates at 142 Yen Level Amid Persistent Yen Selling”
In today’s market, the USD/JPY pair maintains its upward trajectory, regaining the critical 142 yen level during NY trading and briefly surging towards 142.70 yen. The recent revision in the Bank of Japan’s Yield Curve Control (YCC) policy caused a temporary dip to the mid-138 yen level last week. However, robust buybacks during NY trading effectively restored the losses incurred following the BOJ’s announcement.
As we commence the new week, the USD/JPY pair continues to demonstrate a bullish trend. Despite the BOJ’s efforts towards monetary easing, the substantial interest rate differential between the US, Europe, and Japan sustains the yen’s allure as a funding currency for the foreseeable future.
Critics, however, contend that the BOJ’s YCC revision was a half-hearted and perplexing move. Although the YCC policy remains unchanged, with upper and lower bounds maintained at 0.5%, the target range is now allowed to extend to a maximum of 1.0%.
“Some experts believe that the BOJ has squandered a significant portion of its credibility. The yen’s depreciation in the NY market on Friday indicates a lack of genuine trust in the BOJ, which may burden the yen going forward,” speculates an analyst, hinting at the potential for the USD/JPY pair to rise to 145 yen.
Shifting focus to the EUR/USD pair, its growth seems sluggish as prices retreated to the 1.09-dollar range in the latter part of the session. Although today saw the release of the Eurozone’s second-quarter GDP and July Consumer Price Index (HICP) flash estimates, the content failed to justify an additional rate hike by the ECB. As a result, market sentiment now leans towards postponing a rate hike until after last week’s ECB meeting and concerns grow over a potential economic slowdown in the third quarter. Many investors prefer closely monitoring upcoming economic data.
The 21-day moving average hovers around 1.1060 dollars, and the EUR/USD pair remains below this level. With the forex market shifting its focus to economic outlook disparities rather than policy rate differentials, expectations for a stronger dollar are on the rise, leading to more bearish views on the future of the EUR/USD pair.
In regards to the GBP/USD pair, its direction lacks clarity as prices fluctuate around the 1.28-dollar level. The upcoming announcement from the Bank of England’s Monetary Policy Committee (MPC) has created an atmosphere of anticipation regarding the pound’s future. While a 0.25 percentage point rate hike is widely anticipated, all eyes are on the possibility of a more substantial 0.50 percentage point increase.
Short-term financial markets currently incorporate a 30% likelihood of a significant rate hike, which aligns with economists’ expectations. However, it’s essential to recognize that the Bank of England, much like the BOJ, is known for surprising decisions.
Supporters of a substantial rate hike argue that the discrepancy between wage growth and slowing inflation justifies such a move. Nevertheless, a 0.25 percentage point hike would give the Bank of England the opportunity to assess data thoroughly and mitigate the risk of excessive tightening.
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