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On March 2nd, Bank of Japan Deputy Governor Ryozo Himino gave no clear indication of a near-term interest rate hike, reinforcing financial markets expectations that the central bank will remain on hold in March. Following the outbreak of conflict in the Middle East last weekend, the market widely believed the Bank of Japan would maintain a wait-and-see approach. Himino stated, "I want to closely monitor the situation in the Middle East," a stark contrast to his comments in January, when he indicated the committee would discuss interest rate hikes at its upcoming meeting. Himino, who will hold a press conference this afternoon, said his prepared remarks were made before the weekend and therefore did not include his views on the Middle East situation. Himino stated that recent data "means the impact of a near-term rate hike remains limited, and financial conditions remain loose," suggesting there is still room for borrowing costs to rise. He also stated that underlying inflation is steadily rising and cited the Bank of Japans long-standing stance that it will continue to raise interest rates if its economic outlook is realized.Daiwa: Lowered its target price for Xiaomi Group (01810.HK) from HK$55 to HK$45.GFZ (German Center for Geosciences): A 6.05-magnitude earthquake struck the volcanic archipelago of Japan.March 2nd - Explosions were heard again in Kabul, the capital of Afghanistan, in the early hours of March 2nd local time. No official statement has yet been released. Similar explosions were heard in the air over Kabul on March 1st. A spokesperson for the Afghan Ministry of Defense stated that Kabul had launched air defense strikes against Pakistani aircraft.Tesla (TSLA.O): Teslas humanoid robot continues to iterate, and mass production of Cybercab is accelerating.

Following Fed-inspired turbulence, USD/JPY anticipates a major move; US Retail Sales are anticipated

Daniel Rogers

Dec 15, 2022 11:41

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Near 135.40, the USD/JPY pair fluctuates violently during the Asian session. By decreasing volatility, the asset cleans up the mess left by Fed policy-induced volatility, clearing the path for future decisive action.

 

As a result of an interest rate deceleration, the Federal Reserve (Fed) shifted to a smaller rate boost, which caused the major currency to swing dramatically between 134.50 and 136.00. Jerome Powell, chairman of the Federal Reserve, announced a rise of 50 basis points (bps) in interest rates, bringing them to 4.25-4.50%.

 

In the interim, the US Dollar Index (DXY) has risen to approximately 103.70. After opening in the red on Wednesday, S&P500 futures have tried a more robust comeback. Indicative of a revival in risk appetite, it appears that investors are dismissing forecasts of higher interest rate peaks and applauding the novel approach of a smaller and slower interest rate hike.

 

Fed Chair Jerome Powell has warned investors that Average Hourly Earnings, which are not decelerating, are the next factor that has the potential to reverse inflation. Consistent gains in income will keep retail demand healthy and will not compel businesses to reduce prices.

 

Thursday's release of U.S. Retail Sales statistics will attract investors' attention moving ahead. Compared to the prior reading of 1.3% growth, the monthly Retail Sales report for November is expected to decline by 0.1%. A decline in retail demand will contribute to the softening of additional inflation statistics.

 

On the Tokyo front, investors predict the Japanese government to implement additional economic stimulus packages in order to encourage economic growth. The Bank of Japan (BOJ) already favors a policy easing strategy to boost inflation, and this is expected to continue until inflation reaches its target of 2%.


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