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On January 24, analyst Simpson pointed out that the Bank of Japans interest rate hike was expected, but it felt like the first time in a long time that there was no major downgrade of the economic outlook. This opens the door to another 25 basis point rate hike before the end of the year.The Bank of Japan raised interest rates on Friday to the highest level since the 2008 global financial crisis, highlighting its confidence that rising wages will keep inflation stable around its 2% target. "The likelihood of achieving the Bank of Japans outlook has been rising," the central bank said in a statement, with many companies saying they will continue to steadily raise wages in this years annual wage negotiations. The Bank of Japans decision highlights its determination to steadily raise interest rates to around 1%, a level that analysts believe will neither cool nor overheat the Japanese economy. In its quarterly outlook report, the Bank of Japan raised its price forecasts due to the increasingly optimistic prospects for wider wage gains, which will hopefully continue to achieve its inflation target. Data on Friday showed that Japans core CPI accelerated in December, hitting the fastest annual growth rate in 16 months. Bank of Japan policymakers have repeatedly said that if Japan makes progress in achieving a cycle in which rising inflation boosts wages and consumption, allowing companies to continue to pass on higher costs, the central bank will continue to raise interest rates.Japans two-year government bond yield rose to 0.705%, the highest level since October 2008.On January 24, the Bank of Japan raised interest rates to 0.5% on Friday, in line with market expectations, reflecting the banks growing optimism that wages will continue to rise and inflation will remain near its 2% target. The Bank of Japans rate hike was the third in less than a year and raised the policy rate to its highest point since 2008. The committee voted 8:1 to decide on the rate hike, with member Toyoaki Nakamura dissenting from the decision. Reports earlier on Friday showed that the CPI, excluding fresh food, rose 3%, well above the Bank of Japans inflation target. The dollar/yen fluctuated sharply after the resolution was announced. The rate hike decision is good news for the troubled yen. The huge interest rate gap between the United States and Japan has been dragging down the yen after the Federal Reserve signaled a slowdown in monetary easing. One focus of the market now is whether Kazuo Ueda will give any hints on the pace of future rate hikes at the afternoon press conference.Bank of Japan: There is a high degree of uncertainty about future economic growth rate.

USD/CHF Consolidates Around 0.9040 As Attention Shifts To US Inflation

Daniel Rogers

Apr 10, 2023 14:27

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The USD/CHF pair continues to trade lacklusterly above the crucial support level of 0.9036 in the early Tokyo session. Investors are shifting their focus to Wednesday's release of United States Consumer Price Index (CPI) data, making it difficult for the Swiss Franc to gain traction.

 

As tensions between China and Taiwan escalate, S&P500 futures have pared some of their gains. The market's anxiety has been alleviated by the increasing intensity of Chinese military exercises around Taiwan Island. In addition, concerns of a recession are likely to cause volatility in US equities.

 

Jamie Dimon, CEO of JPMorgan Chase, stated in an interview with CNN that the recent banking turmoil caused by the dissolution of Silicon Valley Bank (SVB) and Signature Bank has increased the likelihood of a recession in the United States.  Despite the robustness and security of the banking system, the recent turmoil in the financial system is "another weight on the scale" toward recession, he added.

 

The US Dollar Index (DXY) is protecting the 102.00 support level ahead of US Consumer Price Index (CPI) data. According to the consensus, headline inflation will fall from 6.0% to 5.2%. In addition, the headline monthly CPI would decelerate to 0.3% from 0.4% previously reported. As a consequence of oil prices remaining low in March, inflationary pressures are anticipated to become evident.

 

In contrast, the core CPI, which excludes crude and food prices, is anticipated to increase to 5.6% from 5.5%. The tenacity of inflationary pressures is maintained by the resiliency of demand for essential products, as a result of a higher labor cost index. A similar event could compel the Federal Reserve (Fed) to raise rates again at its May monetary policy meeting.

 

Regarding the Swiss Franc, Swiss markets are suspended on Easter Monday. This week, the Producer Price Index (PPI) data will have an impact on the Swiss Franc.

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