Europe Summary and Highlights 31 July
The USD gained strongly through the European morning, particularly against the JPY.
European morning session
The USD gained strongly through the European morning, particularly against the JPY. USD/JPY rise a big figure to 149.85, while EUR/USD was only marginally softer at 1.1435. AUD/USD also fell significantly, dropping to 0.6450 from an open near 0.6470, and GBP/USD fell 30 pips to 1.3235. USD/CHF and EUR/CHF both edged a little higher, as did EUR/NOK, but EUR/SEK was little changed.
JPY weakness looks to have been related to Ueda’s post BoJ meeting press conference. Although Ueda still indicated a desire to raise rates eventually, his comments suggested no rate hike would come much before the end of the year, as he didn’t expect real wages to pick up much before then. However, Japanese yields were not much changed, and the JPY move looks a little aggressive given the lack of movement in yield spreads and a slightly softer equity tone, although the new highs seen overnight in S&P 500 futures likely also contributed to JPY weakness. The EUR got some support from slightly stronger than expected preliminary July CPI data from France, Italy and Germany, with German unemployment also rising slightly less than expected.
Asia session
BOJ leaves rate at 0.5% as expected with inflation forecast revised higher. Core CPI for 2025 is revised to 2.7% from 2.2%, 1.8% in 2026 and 2% in 2027; while core-core is revised to 2.8% from 2.3%, 1.9% in 2026. The inflation forecast suggest the BoJ will be in no rush to tighten multiple times with 2026 revision remain below 2%. USD/JPY is trading 0.43% lower at 148.83.
Trump announces a trade deal with South Korea. The deal has a similar structure with Japan as it includes a 15% reciprocal tariff, more investment into U.S. and purchase of U.S. LNG. This deal has supported U.S. equities sentiment and see the Nasdaq leading with gains. Regional sentiment is performing individually. AUD/USD us trading 0.53% higher at 0.6467, NZD/USD is also 0.53% higher at 0.5926 while USD/CAD slips 0.08%. Else, EUR/USD is up 0.26% and GBP/USD is up 0.2%.