USDJPY Above 150, But Don't Expect Repeat of Last Year's Interventions

A strengthening US dollar pushed the USDJPY to 150.77 early Thursday. Except for just over 20 hours on 21 October 2022, the pair hasn’t traded higher since 1990.

ECB Firmly on Hold

As expected, ECB kept policy rates unchanged at yesterday's meeting and guided that they are done with additional rate hikes. Lagarde seemed to be on a mission not to rock the boat in terms of market pricing, she succeeded well and gave indications that this was a stock taking meeting only.

Dollar Might Cede Some Ground If Equities Would Enter Calmer Waters

The dollar might cede some ground if equities would enter calmer waters after recent sell-off. EUR/USD tries to regain the October uptrend line (currently 1.057 area). If it succeeds it could create some short-term relief for the pair.

USD/JPY Edges Lower, Tokyo Core CPI Rises

Tokyo Core CPI climbed 2.7% y/y in October, above 2.5% in September which was also the consensus estimate. The index, which excludes fresh food is a key indicator of inflation trends in Japan and is closely monitored by the Bank of Japan. Tokyo’s headline CPI also rose in October, from 2.8% to 3.3%.

Sunset Market Commentary

Stocks trade pretty volatile. The EuroStoxx50 swung from losses to gains back to losses (twice). All indices on Wall Street opened with gains but only the S&P500 (+0.1%) and Nasdaq (0.80%) can currently maintain some of them. Though fragile, the minor improvement in risk appetite lifts the euro from the daily lows.

Bank of England Preview

BoE call. We maintain our call that the BoE has delivered its final hike of this hiking cycle, which is in line with current market pricing. We expect the first rate cut of 25bp in June 2024 and subsequently a 25bp cut in the following quarters, totalling of 75bp of cuts for entire 2024.

Will Fed Officials Reiterate Their 'Higher for Longer' Mantra?

Although at their last gathering Fed policymakers maintained their projections of one more hike before the end credits of this tightening cycle roll, they have been appearing in dovish suits recently, signaling that the surge in Treasury yields since then has done the work for them, implying that another hike may eventually not be needed.

A Low-Tolerance RBA Won't Yet Have Seen Enough to Move

The main domestic data this week was the September labour force release. As colleague Westpac Economist Ryan Wells noted yesterday, the data were a mixed bag. Looking through the monthly noise, the labour market is continuing to cool gradually from its earlier tightness. There was nothing in the data to nudge the RBA in the direction of raising rates.

Weekly Economic & Financial Commentary: Impact of Middle East Developments on Rates and Inflation

Many financial market participants are looking over their shoulders wondering what could be the next catalyst to drive rates higher. What might we see in the rates market, given the conflict in the Middle East and potential inflation drivers from higher commodity prices and overall wartime expenditure from the federal government?

Geopolitics in the Driver's Seat ahead of PMIs and ECB

Middle East conflict: Hamas released two US hostages and aid started entering Gaza through Egypt's border. However, Israel has increased air attacks on Gaza in anticipation of the next stage of the conflict with Hamas. Israel also cautioned that Hezbollah could potentially involve Lebanon in a broader regional warfare.