It’s unlikely that USD/JPY move lower is a false dawn – SocGen

USD/JPY down 84 pips to 109.81 today

USD/JPY down 84 pips to 109.81 today

Societe Generale Research discusses the ongoing move lower in USD/JPY.

“The yen is, after a period of ignoring the fall in US real yields, coming home to them with a bang. The chart shows 10yr TIPS and USD/JPY, which has been very hard to understand since mid-April. Q3 is starting on a much sounder footing. The caveat is that the fall in longer-dated US yields at the start of April saw USD/JPY fall from 111 to 107.50, before the largely unintelligible rally back to 111.60,’ SocGen notes.

“This could be a false dawn especially if TIPS yields turn higher and market volatility leaches away again. But that’s unlikely with Covid concerns, more volatile oil prices, a debate about growth peaking, and with central bank policies diverging,” SocGen adds.

European equity close: Rough day but off the lows

Big declines across the board

Yesterday was the best day in the DAX in seven weeks with a 1.1% gain but all that has been wiped out and more today.
  • DAX -1.8%
  • UK FTSE 100 -1.7%
  • French CAC -2.1% (worst since April 20)
  • Spain IBEX -2.3%
  • Italy MIB -2.6%
There was a moderate bounce in the final 30 minutes of trading that has extended in US trading, where the S&P 500 has trimmed its decline to 40 points.

BOJ reportedly expected to cut growth forecast for the year as virus restrictions dampen outlook

Reuters reports, citing sources familiar with the situation

The report says that the BOJ is expected to slash this fiscal year’s growth forecast in its latest projections next week, as another state of emergency for Tokyo threatens to dent consumption and general economic activity.
Adding that the BOJ is to stick with the view that the economy is headed for a moderate recovery. As for inflation, the sources say that the central bank is likely to revise up this fiscal year’s inflation forecast to reflect the recent boost in energy prices.
Just a bit of a heads up before the BOJ policy meeting decision next Friday on 16 July as these leaks tend to prove to be credible most of the time.

AUD/USD falls to fresh lows for the year as risk aversion kicks in

AUD/USD down 0.6% to 0.7430 levels, the lowest since December last year

AUD/USD D1 07-08

The aussie is among the big losers so far today as commodity currencies are seeing a general retreat, with risk aversion kicking into gear in European morning trade.

And as risk retreats amid the uncertainty, the aussie is seeing a fresh fall to its lowest levels this year, down to 0.7431 at the lows today.
The drop now threatens a break below the 21 December low @ 0.7462 and puts the 0.7400 handle as well as the 61.8 retracement level @ 0.7379 in sight.

PBOC yuan intervention, US$23bn amount

That estimate in the headline is via ANZ analysis:


  • China FX reserves fell $7.8b in June to $3214b.
  • After adjusting for valuation and income effects … I estimate that the PBOC intervened by $23bn to buy USD and sell yuan
  • most of which likely occurred when yuan was trading beyond 6.40 during the first half of June


ANZ note that … “This is the most in a while

By buying USD/yuan the PBoC is aiming at weakening the yuan. Look like under 6.4 was the line in the sand; a level to perhaps to keep an eye on ahead should yuan strengthen again. Don’t go betting the farm on relying on the People’s Bank of China though folks.

yuan intervention pboc

Goldman Sachs on the Fed FOMC minutes – looking for a December taper, maybe even November

A snippet from Goldman Sachs commentary on the Federal Open Market Committee June 2021 minutes released earlier:


  • While not ruling out a September announcement, the minutes noted that the Committee will “begin to discuss” plans for tapering “in coming meetings.”
  • We continue to expect a December tapering announcement, with November also a possibility.


If you need a catch up on the minutes:

  • FOMC Minutes: Various participants saw taper ‘somewhat earlier’ than anticipated
A snippet from Goldman Sachs commentary on the Federal Open Market Committee June 2021 minutes released earlier:

Coming up ahead today, Thursday 8 July 2021, the ECB is set to increase its inflation target to 2%

The European Central Bank has completed its 18-month strategy review and is set to announce the results today.

  • The ECB announcement is scheduled for 1100 GMT
  • European Central Bank President Lagarde will speak following at a 1230 GMT news conference
The main point is the change to the Bank’s inflation target.
  • likely to set its inflation target at 2%
  • ditching its current target that is “below but close to 2%”
  • target is also likely to be declared symmetric (an optimistic declaration ongoing on to a decade missing to the downside) and the Bank will accept an overshoot
  • the Bank may also follow the lead of the Fed in targeting average inflation over a period
European Central Bank Presdient Lagarde
I am really hoping Lagarde says the target is now a gooooooooooaaaaaaaaaaaaalllllllllllllll. Getting into the swing of the soccer tournament currently in progress in Europe.
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