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July 30th - US semiconductor stocks extended their gains, with the Philadelphia Semiconductor Index rising 9% and the Nasdaq Composite Index currently up 2.6%. Micron Technology (MU.O) surged over 16%, AMD (AMD.O) rose over 15%, and Intel (INTC.O) climbed over 14%.U.S. EIA natural gas inventories for the week ending July 24 were 28 billion cubic feet, compared to an expected 35 billion cubic feet and a previous reading of 32 billion cubic feet.World Trade Organization: Brazil has filed a dispute settlement lawsuit over US tariffs.On July 30, the Thailand Futures Exchange issued an announcement stating that due to a 2.50% drop in the USD/JPY futures trading price compared to the most recent settlement price, and in accordance with the guidelines for suspending trading of derivatives due to triggering daily price fluctuation limits, the Thailand Futures Exchange decided to temporarily suspend futures trading of this currency pair from 21:04:41 local time, and resume formal trading at 21:06:41.On July 30th, after the Bank of England kept interest rates unchanged and stated that domestic inflationary pressures were easing, UK short-term government bonds saw their biggest single-day gain in over a month. The yield on the most sensitive monetary policy gilt fell 11 basis points to 4.34%, the largest single-day drop since June 12th. Bank of England Governor Bailey stated at a press conference that he did not want people to "leave the meeting with the impression that the committee is gradually moving towards raising interest rates," after which UK government bonds further extended their gains. Influenced by the Bank of Englands dovish stance, the money market expects the Bank of England to raise interest rates by a cumulative total of about 32 basis points by the end of this year, lower than the 38 basis points before the decision was announced. The markets probability of a rate hike at the September meeting has also fallen from nearly 60% to less than 40%. James Lynch, portfolio manager at Aberdeen Asset Management, said, "The threshold for a Bank of England rate hike is very high." He expects the Bank of England to keep interest rates unchanged for the remainder of the year. He stated that Bailey was "more definitive than I expected."

On the back of dismal BOJ Minutes and falling yields ahead of US data, the USD/JPY falls toward 136.00

Alina Haynes

Jul 26, 2022 11:55

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The USD/JPY pair is retesting its intraday low at 136.30 in Tokyo during the first hour of trading on Tuesday. As a result, the yen pair reverses the corrective loss from the previous day in reaction to falling US Treasury rates and conflicting comments from the minutes of the Bank of Japan's (BOJ) Monetary Policy Meeting.

 

According to the minutes of their rate-setting meeting in June, Bank of Japan officials agreed that ultra-low interest rates must be maintained to support a fragile economy and ensure that rising inflation was supported by higher wages. According to the Minute statement, members agreed that the BOJ must support the economy, which is under pressure from rising commodity prices.

 

The fear of a recession has returned in other areas of the world despite US authorities' efforts to lessen it. Ben Harris, Assistant Secretary for Economic Policy, and Neil Mehrotra, Deputy Assistant Secretary for Macroeconomics, two representatives of the US Treasury, recently voiced hope for a stronger US gross domestic product (GDP). While GDP shrank in the first quarter, aggregate income, which includes wages, business earnings, rental and interest income, continued to rise at an annual pace of 1.8 percent. This is known as gross domestic income (GDI).

 

A second quarter GDP decline would not indicate a recession owing to the underlying strength of the labour market, demand, and other indicators of economic health, according to US Treasury Secretary Janet Yellen, who addressed concerns about a US recession earlier in the week.

 

The Dallas Fed Manufacturing Index for July fell to its lowest levels since mid-2020, posting -22.6 compared to -12.5 forecast and -17.7 previously, which is noteworthy given that the Chicago Fed National Activity Index printed -0.19 in June as opposed to the anticipated -0.03 figure.

 

In addition, Bloomberg's investigation shows that the absence of trade between Australia and China is causing the Chinese recession worries that are weighing on the economic slowdown in the major countries to also be driving down the USD/JPY exchange rate. According to Bloomberg, "China's economic slowdown is spreading to important exporting countries in Europe and East Asia through weakened demand for manufactured goods, forcing Germany and South Korea to declare unusual deficits with the second-largest economy."

 

Wall Street ended with a mixed showing, with the DJI30 and S&P 500 seeing relatively modest gains while the Nasdaq saw only small declines. The 10-year US Treasury rates, on the other hand, broke a three-day downward trend and rose by around 1.75 percent, returning to the 2.81 percent level recently. S&P 500 Futures saw a notable intraday loss of 0.37 percent as of publication.

 

The key indication for intraday change for pair traders appears to be the US CB Consumer Confidence for July, formerly 98.7. As the markets get ready for a 0.75 percent interest rate increase, the Federal Open Market Committee (FOMC) meeting on Wednesday will be crucial.


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