Europe Summary and Highlights 20 September
USD/JPY gained a figure and a half through the European morning session following the Ueda press conference, which was seen as showing a less hawkish stance than communicated in July.
European morning session
USD/JPY gained a figure and a half through the European morning session following the Ueda press conference, which was seen as showing a less hawkish stance than communicated in July. The trigger seems to have been Ueda’s indication that market remain unstable, in reference to a question about deputy governor Uchida’s remark that the BoJ would not raise rates while markets remain unstable. Markets also reacted to the comment that there is some time to make decisions on monetary policy because upside price risks have decreased given recent FX moves. Other than that, Ueda’s comments remained broadly hawkish, and there was minimal movement in Japanese yields, but the JPY nevertheless weakened sharply.
Otherwise, the main news was the UK retail sales data for August, which came in stronger than expected at 1.0% m/m, and briefly pushed EUR/GBP to new lows for the year at 0.8381, the lowest since August 2022, although this move was largely reversed by the end of the morning. The USD was only marginally higher other than against the JPY, although the CHF did also weaken somewhat in sympathy, with EUR/CHF gaining 20 pips to 0.9470.
Asia Session
BoJ has kept rates unchanged at 0.25%. The statement indicates that BoJ view current trajectory of inflation in line with their forecast, which indirectly suggest the BoJ will go along their hawkish tilt and see more tightening coming. The Japan August Headline CPI has come in higher than prior at +3.0% y/y and will be support BoJ's hawkish policy take. Ex fresh food and ex fresh food & energy are also coming higher than July by 0.1% y/y. USD/JPY remains 0.28% lower at 142.22 with U.S. Treasury Yields lower and JGB yields higher.
Regional equities are performing individually while U.S. three major equity indexes are all in the red by less than 0.1%. The USD is trading broadly softer and is benefiting the majors. AUD/USD reversed early gains to trade 0.08% lower at 0.6809, NZD/USD is uncahnged while USD/CAD rose 0.05% to 1.3565 as oil slips thrity cents. Else, EUR/USD is up 0.02% and GBP/USD is up 0.07%.