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January 13th - According to a source familiar with the matter, global central bank officials are working to issue a statement in support of Fed Chairman Jerome Powell following the Trump administrations significant escalation of pressure on the Federal Reserve. The joint statement is expected to be released under the name of the Bank for International Settlements and is open for signature by all central banks. The source also indicated that due to time zone differences, central bank governors will need time to refine their wording, so the statement could be released as early as Tuesday.Frances November government budget was -€155.407 billion, compared to -€136.2 billion in the previous month.Central banks around the world are drafting a statement to express their support for Federal Reserve Chairman Jerome Powell. The joint statement is expected to be released under the name of the Bank for International Settlements (BIS).The onshore yuan closed at 6.9765 against the US dollar at 16:30 on January 13, down 23 points from the previous trading day.On January 13th, Matt Weller, Head of Market Research at Forex.com, stated that he expects both the overall and core CPI in the US to rise by 2.7% year-on-year in December. Overall, the process of inflation falling back towards the 2% target has stalled for over a year, with the overall CPI year-on-year increase consistently hovering between 2.3% and 3%, while the core CPI has also remained in the mid-to-high range of 2.5% to 2.9%. Despite inflation continuing to exceed the target level, the Federal Reserves concerns about the job market are still considered a more pressing issue, and the market expects the federal funds rate to be further lowered this year. However, the implied probability of the Fed cutting rates again at its March meeting is only about 25%, and the market is confident that the Fed will keep rates unchanged this month. The news that the US Department of Justice subpoenaed Powell this weekend adds additional risk to the Feds independence. While this is a low-probability event, it increases the likelihood of Trump replacing the Fed chairman earlier than planned. If this happens (although the probability remains low), regardless of current inflation data, we may see more aggressive rate cuts.

The USD/JPY advances somewhat above 134.00 as negative sentiment and Fed worries combine with rising interest rates

Daniel Rogers

Feb 20, 2023 11:18

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USD/JPY establishes an intraday high towards the middle of 134.00 as it gains bids to reverse the previous day's decline from a multi-day high on Monday morning. In doing so, the Yen pair reflects the broad US Dollar gain amid fairly gloomy sentiment and the US and Canadian vacations.

 

Nonetheless, geopolitical concerns about China, North Korea, and Russia have recently weighed on market sentiment, despite the short calendar and absence of US/Canadian traders restraining momentum.

 

North Korea fired two ballistic missiles toward Japan over the weekend, reviving concerns that the hermit kingdom is up to something that could endanger the global economy. This is partly owing to the fact that both rockets were classified as tactical nuclear assault weapons.

 

In a similar vein, the most recent meeting between US Secretary of State Antony Blinken and China's top diplomat Wang Yi did not appear to have repaired US-China relations. Possible cause is a comment by a Chinese envoy that the United States must change course and restore the damage caused to Sino-American ties by the indiscriminate use of force. Ambassador Linda Thomas-Greenfield, US representative to the United Nations, declared on Sunday that China would cross a "red line" if it opted to provide lethal military aid to Russia for its invasion of Ukraine.

 

Meanwhile, better-than-expected readings of the US Consumer Price Index (CPI) and Retail Sales followed earlier positive readings of employment and output statistics and raised US Treasury bond yields and the US Dollar. The hawkish Federal Reserve (Fed) views and the aforementioned risk-negative factors may be comparable.

 

Fed Governor Michelle Bowman recently observed, as reported by Reuters, "We are observing an abundance of contradictory economic data." As reported by Reuters, Thomas Barkin, president of the Richmond Federal Reserve, claimed that they are detecting some inflationary progress due to the normalization of demand.

 

It should be underlined that the mixed leaning for the Bank of Japan’s (BoJ) new monetary policy board and chatters of more inflation in Japan likely to place a floor under the Yen.

 

Among these trades, the S&P 500 Futures print small losses even as Wall Street closed neutral. It’s worth noting that the US 10-year Treasury bond yields jumped to the highest levels since early November in the last week and helped the DXY to register a three-week advance.

 

For forward, Japan’s National Core Inflation figures will join the second reading of the US fourth quarter (Q4) Gross Domestic Product to steer immediate USD/JPY fluctuations. Yet, the most attention will be paid to the Federal Open Market Committee (FOMC) Meeting Minutes.

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