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.
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.
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.
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
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.