European Summary and Highlights 26 Apr

European morning session

USD/JPY initially edged higher in the European morning, following the trend seen in Asia after the BoJ meeting. But at 9 am London time USD/JPY fell 170 pips in 3 minutes, leading some to suspect BoJ intervention. But there was no confirmation from the Japanese authorities, and the move may not have been due to any official action, but rather a market driven short squeeze. Either way, USD/JPY recovered back to 156.65 y the end of the morning, less than 20 pips off the 156.84 34 year high made at 08:30 London time.

EUR/USD showed a slightly firmer tone, rising to a high of 1.0753 from an open around 1.0725, helped by the stronger than expected Eurozone M3 data, which showed a 0.9% rise in the month in March. However, household and business loan growth remained weak, and money growth is still also at historically low levels, so the data us unlikely to impact ECB thinking. Nevertheless, EUR/USD held slightly higher levels, trading near 1.0735 at the end of the morning. The EUR also traded higher against the scandisk, but as stead against GBP and AUD.

Asia session

Aligned with our forecast, the BoJ decided to keep rates unchanged at 0-0.1%. While the monetary policy statement is a short one, key economic forecast has been revised. 2024 less fresh food CPI has been revised higher to 2.8% from 2.4% and 2025 from 1.8% to 1.9%, while less fresh food & energy is unchanged in the big figure. 2024 GDP has been revised lower to 0.8% from 1.2% and 2025 unchanged. From the rhetoric "expect accommodative monetary conditions to continue for the time being" and "extremely high uncertainties on Japan's economic and price outlook", it echoes with our view that BoJ is in no rush to further tighten and would rather let data plays out their role. Tokyo CPI that missed estimate have been overlooked as market participants question the latest change of CPI calculation with high school tuition. Tokyo headline April CPI came in at 1.8%, less fresh food 1.6% and less fresh food & energy 1.8%. While market participants await Ueda's press conference, it is hard for him to be hawkish with the current forecast and statement. USD/JPY is seen trading 0.24% higher at 156.02 with JGB yields outpacing their U.S counterpart but has erased partial opening gains.

Risk sentiment is broadly positive as the after hours jump In Alphabet and Microsoft signals a more cheerful mood. Regional sentiment follows with Chinese, Hong Kong and Japan major equity indexes all in the green. helping Aussie to fight against the solid USD. AUD/USD is trading 0.08% higher at 0.6523, NZD/USD is 0.11% higher at 0.5955 while USD/CAD is unchanged. Else, EUR/USD is down 0.06% and GBP/USD down 0.11%.