As the North American session begins, the US dollar is the strongest and the Australian dollar is the weakest. The Japanese Yen sits just behind the Australian Dollar as one of the weakest currencies after comments from Japan's Finance Minister and Bank of Japan Ueda failed to sufficiently scare off JPY sellers. The Japanese Yen is moving lower for the third day in a row (USDJPY and other Japanese Yen pairs are rising).
Suzuki's statements emphasize careful monitoring of foreign currency movements, stressing the importance of stability and the negative impact of the weak yen. He stressed the urgent need to monitor market fluctuations without committing to specific forex levels or defending absolute limits. Suzuki expressed his readiness to intervene if necessary to address rapid and unwanted shifts in currency values, aiming for moves that reflect economic fundamentals.
While addressing parliament, Ueda stressed that the Bank of Japan's monetary policy primarily targets inflation, not the yen price, although he acknowledged the significant impact of foreign exchange movements on the economy. He noted that a weak yen increases import costs, affecting the economy and potential inflation trends. While the Bank of Japan does not aim to control foreign exchange rates directly, it considers them one of many factors that affect the economy. Ueda stated that if yen fluctuations significantly affect inflation trends, the Bank of Japan may adjust monetary policy accordingly. The inflation trend is expected to gradually approach 2%, and the Bank of Japan is prepared to adjust its monetary stance earlier than expected if inflation risks or actual interest rates deviate significantly from their expectations. In addition, Ueda stated that the Bank of Japan will continue daily bond purchases, adjusting the amount based on market developments while maintaining the current pace for the time being. He also stressed that the Japanese economy is recovering, albeit with weak points, and expressed his readiness to adapt to economic shocks by all available means, including unconventional measures. The rapid decline in the yen has been unilaterally described as undesirable for the economy.
Geopolitically, Israel sees no signs of a breakthrough in the truce talks in Gaza. But the Israeli delegation is still in Cairo. Yesterday, it was reported that Palestine had accepted the agreement, but the agreement was not what Israel proposed. So it was rejected immediately.
The economic calendar in Europe was minimal with German industrial production falling by -0.4% versus -0.6% expected. The calendar for the North American session couldn't be any livelier with the release of (revised) wholesale inventories at 10 AM ET. The estimate is -0.4% +0.4% last month. The weekly oil inventory data will be at 10:30 AM, with crude oil inventories expected to show a decline of -1.066M and gasoline inventories are expected to reach -1.255M. Private data released yesterday showed an increase of 0.509 million in oil inventories and an increase of 1.460 million for gasoline. Today the price of crude oil fell by around -$0.90.
On the Fed's speakers circuit today, Fed Governor Lisa Cook, Fed Chairman Collins and Fed Governor Jefferson are all expected to express their views on matters following the Fed's decision last week.
Note that the Bank of England will meet tomorrow and after the final decision at 7 AM ET.
A snapshot of other markets is currently emerging as the North American session begins.
- Crude Oil was trading down $0.82 or -1.05% at $77.56.. At this time yesterday, the price was at $78.28
- Gold is trading unchanged at $2,313.58. At this time yesterday, the price was higher at $2,313.32
- Silver is trading almost unchanged at $27.22. At this time yesterday, the price was at $27.26
- Bitcoin is currently trading at $62,357. At this time yesterday, the price was trading at $53,811
In pre-market, major US indices are trading lower after mixed/little changed values yesterday:
- Dow Jones Industrial Average futures indicate a decline of -17.26 points. Yesterday, the index rose 31.99 points, or 0.08%, to 38,884.27.
- S&P futures are indicating a decline of -10.20 points yesterday, and the S&P was up 6.90 points, or 0.13%, at 5,187.71.
- Nasdaq futures indicate a decline of -44.12 points. Yesterday, the index decreased by -16.69 points, or -0.10%, to 16,332.56.
European stock indices are trading mostly higher:
- German DAX +0.31%
- France CAC, closed for holiday
- UK FTSE 100, +0.27%
- Spanish Ibex +0.51%.
- Italian FTSE MIB, -0.22% (10 minute lag).
Shares in Asia Pacific markets were mixed/higher:
- Japan's Nikkei 225 Index, -1.63%
- China's Shanghai Composite Index, -0.61%
- Hong Kong Hang Seng Index, -0.90%
- Australian S&P/ASX, +0.14%
Looking at the US debt market, the yields are higher. Today the US Treasury will auction 10-year bonds. Yesterday, three-year notes were auctioned off with strong demand (the tail was negative and bidding numbers for cover were higher than the six-month average). Tomorrow they will auction 30-year bonds:
- The two-year yield is 4.842%, +1.5 basis points. At this time yesterday, the yield was at 4.822%.
- 5-year yield 4.497%, +2.6 basis points. At this time yesterday, the yield was at 4.476%.
- The 10-year yield is 4.487%, +2.7 basis points. At this time yesterday, the yield was at 4.473%.
- The 30-year yield is 4.628%, +2.4 basis points. At this time yesterday, the yield was at 4.619%.
Given the spread of the Treasury yield curve, the yield curve is steeper (but still negative):
- The profit margin for 2-10 years is -35.5 basis points. At this time yesterday, the spread was at -34.9 basis points
- The profit margin for 2-30 years is -21.4 basis points. At this time yesterday, the spread was at -19.8 basis points
Benchmark European 10-year bond yields rose.
European benchmark 10-year bond yields
