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On June 30th, Futures News reported that oil prices rose yesterday due to a series of attacks on oil tankers near the Strait of Hormuz and the resumption of military operations between the US and Iran. Although the two sides subsequently suspended military operations, renewed market concerns directly led to a rise in oil prices. Zhuochuang Information predicts that continued attention should be paid to developments in the Middle East. If the situation does not escalate further, or even de-escalates, oil prices will likely decline. Otherwise, market volatility will persist, and oil prices will fluctuate widely at high levels. In the short term, US crude oil is expected to fluctuate weakly around $70.June 30th - According to four sources with direct knowledge of the discussions, the unexpectedly rapid decline in energy prices over the past week has further eased pressure on European Central Bank (ECB) policymakers to raise interest rates next month, but the rationale for a small rate hike remains strong. The ECB raised rates this month to prevent a surge in oil prices triggered by the Iran war from inflating market price expectations, and policymakers are currently discussing the urgency of further rate hikes. The sources stated that the speed of the oil price decline surprised them, with futures prices for several key maturities now even lower than the ECBs previously predicted "relatively mild" rate hike scenario. Previous concerns about shortages of supplies such as aviation fuel have proven unfounded, as some oil-producing countries, particularly Saudi Arabia, have exceeded expectations in energy production to ensure market supply. The sources added that even amid the escalation of the conflict between Iran and the United States over the weekend, oil prices did not react strongly, indicating that the normalization process in the energy market is progressing. Currently, a September rate hike remains the most likely scenario, but the sources pointed out that the June inflation data to be released on Wednesday is still of greater importance. If the June inflation data unexpectedly rises sharply, a July rate hike may re-emerge as a focus of discussion.The yield on Japans 5-year government bonds rose 2 basis points to 1.890%.On June 30th, the Bank of Japan (BOJ) appointed Ayano Sato, considered a supporter of loose monetary policy, as a new board member. This appointment increases the likelihood of two dissenting votes on future interest rate hike proposals. Although the nine-member board remains hawkish overall, this structural change could slow the pace of the BOJs tightening policy. The departure of the boards most steadfast hawks, Naoki Tamura and Hajime Takada, in July next year adds uncertainty to the policy tightening path. Sato is scheduled to hold a press conference at 5 PM Tokyo time (4 PM Beijing time) on Tuesday, and the market will closely watch whether she will align with Toshiro Asada and oppose further tightening. Her formal policy debut will take place at the July 30-31 meeting, where the BOJ is widely expected to maintain interest rates. The market will weigh Sanae Takaichis apparent monetary prudent stance (related to the financing costs of her government investment program) against the BOJs established position of continuing to tighten policy in response to price pressures driven by the energy shock.European Central Bank sources say that if June inflation data unexpectedly rises sharply, a July rate hike may become a focus of discussion again.

As BoJ Udea Mentions the Appropriateness of Current Monetary Policy, EUR/JPY Exhibits a V-Shaped Movement

Daniel Rogers

Feb 24, 2023 14:30

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When Kazuo Ueda, the nominee for Governor of the Bank of Japan (BoJ), addresses the Japanese parliament, the EUR/JPY currency pair exhibits a V-shaped movement. The commentary of Haruhiko Kuroda's successor as Governor of the Bank of Japan has increased the volatility of the Japanese Yen.

 

As he describes the current monetary policy as appropriate and necessary to sustain 2% inflation, BoJ Ueda's speech appears more diplomatic. Moreover, he stated that rising import prices are the cause of Japan's rising inflation. Domestic demand is still insufficient, but the central bank is attempting to achieve pre-pandemic growth rates. The neighborhood has descended into lunacy as a result of his speech's absence of Yield conversion control (YCC) discussions.

 

Despite current discussions about the expansion of the YCC, the economic outlook for the Japanese Yen is positive, as the Bank of Japan is working to increase labor costs, which will confidently support a revival in overall demand.

 

Nordea economists continue to be optimistic about the Japanese Yen: "We remain fairly sanguine on JPY due to our expectations of a change in Bank of Japan monetary policy later this year." According to a note from Nordea, the time is ripe for a normalization of the Bank of Japan's stimulative monetary policy, "with inflation reaching its highest level in decades and a prognosis for higher wage growth."

 

Despite the easing of inflationary pressures, investors are concerned that the normalization of the Eurozone economy will take a significant amount of time. In order to maintain a ceiling on the price index, the European Central Bank (ECB) is anticipated to continue raising interest rates.


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