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On June 30th, European Central Bank (ECB) President Christine Lagarde stated that the ECBs 25-basis-point interest rate hike in June was not a "precautionary" move to guard against future inflation risks, but rather a "prudent decision" based on the economic and inflation situation at the time. She stated that if the rate hike had not been implemented, inflation would have remained above the 2% target in 2027 and 2028, and new circumstances since the June meeting, including the decline in oil prices, have not changed the ECBs initial assessment. Lagarde emphasized that the ECB now has a more comprehensive system of data, indicators, and forecasts, and monetary policy will adhere to the principle of "data-driven, meeting-by-meeting decision-making," rather than relying on forward guidance. She also pointed out that in the current market environment, financial conditions often adjust themselves based on economic data, allowing monetary policy to take effect before formal decisions are made, giving the ECB more time to assess changes in the situation.European Central Bank President Christine Lagarde: We can continue to raise interest rates without worrying that monetary policy tightening itself will become a source of financial stress.European Central Bank President Christine Lagarde: In times of uncertainty, forward guidance loses its value.European Central Bank President Christine Lagarde: We face the prospect of rising overall and core inflation.European Central Bank President Christine Lagarde: The sustainability of the US-Iran peace agreement is far from guaranteed.

USD/JPY falls to 146.00 as the DXY weakens and interest in BOJ policy rises

Alina Haynes

Oct 27, 2022 15:28

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During the Asian session, in response to negative signals from the US dollar index, the USD/JPY pair plunged below 146.00. (DXY). Following Wednesday's low of 146.22, the asset's two-day downward trend has extended. The main index is reaching the bottom of Monday's knee-jerk reaction near 145.77 as it continues to decline.

 

The dollar bears are facing a severe sell-off due to the positive market sentiment. The risk-sensitive currencies have benefited from an increase in risk appetite. The US dollar index (DXY) has struck a new monthly low of 109.56 and is anticipated to stay volatile until the release of crucial US economic data.

 

The increased demand for U.S. government bonds has resulted in a decline in yields. This is due to the global markets' increased confidence. The yield on 10-year United States Treasury notes has decreased to 4%.

 

According to estimates, the Gross Domestic Product of the United States expanded by 2.4% in the third quarter. Despite the ultra-hawkish monetary policies of the Federal Reserve (Fed) and the previously disclosed 0.6% fall in growth, forecasts indicate a positive growth rate.

 

In addition, US Durable Goods Orders data will continue to be a key point. Compared to a reduction of 0.2%, it is projected that economic statistics will increase by 0.6%. Notable is the increase in core inflation, which includes oil and food prices. In spite of this, the predicted increase in demand for durable goods in the United States demonstrates healthy household demand.

 

Investors in Tokyo are anticipating the Bank of Japan's (BOJ) interest rate decision on Friday. In view of the shocks to foreign demand, BOJ Governor Haruhiko Kuroda will continue an ultra-loose monetary policy to stimulate the outlook for economic development. In addition, Japanese policymakers are anxious that the inflation rate could go below 2%; hence, an extremely liberal policy is the best alternative.

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