Data Supports BoJ Tweak, Not Bold Moves

We expect enough reflation traction for the BoJ to hike its policy rate to zero in Q2 2024. However, we think there is a long way to a situation where the BoJ can tighten much further than that.

US Inflation Data Could Add Fuel to Dollar's Resurgence

The US dollar has gone on a tear in recent weeks amid signs that the US economy remains resilient, in contrast to Europe and China that are rapidly losing steam. Whether this rally continues or suffers a setback will depend on the latest CPI report on Wednesday at 12:30 GMT. Overall though, the outlook for the dollar seems quite bright.   

The Weekly Bottom Line: Higher for Longer Seems Surer

A slew of Federal Reserve speakers hint that the central bank may skip a rate hike at the next meeting, as the Beige Book (the Fed’s survey of economic conditions) suggests that the economy closed out the summer on a modest note.

Weekly Economic & Financial Commentary: China's Economic Free Fall Continues

This week, new data revealed China's economic slowdown is still in effect and a bottom has yet to be reached. China's August Caixin PMI indices showed a more robust deceleration in the services sector than expected. Service sector problems reflect Chinese households' unwillingness to spend and a preference to save, which not even the lifting of Zero-COVID policies has been able to alter.

Forex and Cryptocurrencies Forecast

For the eighth consecutive week, the U.S. Dollar Index (DXY) is rising, while EUR/USD is declining. The currency pair has retreated to levels last seen three months ago, settling in the 1.0700 zone. It was only the dollar bulls starting to lock in accumulated gains on Friday, September 8, that prevented further declines.

Busy Week Ahead

A busy week starts off with inflation data from the Nordics. In Norway, strong wage growth continues to support broader inflation pressures, and we expect August core inflation to tick slightly higher to 6.6% y/y (from 6.4%). In Denmark, inflation likely remained more muted, we think headline prices rose 3.0% y/y in August.

Aussie Recovery Likely Needs Help from US CPI

The Aussie hit 10-month lows last week but is finding a little support to start this week as the greenback falters. Australia’s jobs data will be closely watched but US CPI dominates the global calendar.

Asian Currencies Lead FX Scoreboard This Morning

Asian currencies lead the FX scoreboard this morning. The Japanese yen surges from a close last Friday at USD/JPY 147.83 to 146.05 currently following comments from Bank of Japan governor Ueda. He told the Yomiuri newspaper that there may be enough information to judge whether wages are rising sustainably. Wage growth is critical in the BoJ’s view of inflation hitting the 2% target in the medium term.

Could This Week’s Data Prints Cement Next Week's BoE Rate Hike?

Central banks have put the summer break behind them and are preparing for a frantic period ahead. The BoE is hosting its meeting next week, on September 21, a day after the Fed’s respective meeting. In the meantime, central bankers continue to evaluate Fed Chairman Powell’s message at the Jackson Hole gathering and strategize their own monetary policy actions after a very strong rate hiking cycle.

Japanese Yen Soars as Ueda Says BoJ Could Raise Rates

The Japanese yen has roared out of the gates on Monday and gained 1% against the US dollar. In the European session, USD/JPY is trading at 146.34.