USDJPY rallies as BoJ stays put
The yen weakens as the BoJ keeps the status quo with dovish guidance. Despite volatility after the central bank let bond yields move more freely, officials have stressed that the tweak to yield curve control was not a signal for an exit from ultra-loose monetary policy. Inflation has climbed above the 2% target for about a year now but the BoJ is still reluctant to label it as an entrenched phenomenon. If inflation continues in an upward fashion, the major turning point would be when the bank realises that it has underestimated its sustainability. The pair is bouncing towards the recent high of 150.60 and 137.50 is the closest support.
NZDUSD retreats as urge to hike fades
The New Zealand dollar falls back as cooling data may lift the burden off the RBNZ to push rates higher. One of the major headaches for global central banks is the stickiness of inflation caused by tight labour markets. But as far as the RBNZ is concerned, an unemployment rate hitting a two-year high could be the lesser evil as it might keep a lid on wage pressures. Should inflation expectations show signs of easing, the central bank may become comfortable with keeping its official cash rate unchanged for the foreseeable future. A lack of a bullish catalyst could send the kiwi to 0.6000 with 0.6250 as the first resistance ahead.
UKOIL hits 4-month high
Oil rallied as Saudi Arabia said to extend its production cut by one million barrels per day into September. The announcement was followed by Russia’s pledge to reduce output on its side. The two major producers’ effort to support the market comes at a time when oil prices fell below their pre-Russo-Ukrainian war level, but will it be enough to offset concerns on the demand side? While China’s post-Covid rebound so far has failed to impress, the buy side might find relief in the prospect of the end of the global rate hike campaign. Brent crude is testing its four-month high of 87.50 and 78.50 is the first support.
NAS 100 awaits CPI catalyst
The Nasdaq 100 pulls back as the market digests a series of big tech company earnings. Investors are trying to navigate between decent corporate earnings and lingering risks at the macro level. Fitch’s surprise cut of the US government’s credit rating from AAA to AA+ has put a dent in risk-taking but it might just offer a window for the bulls to take profits on five months of gains. Limited market reactions suggest that a soft landing for the economy remains the collective belief. Rather, the upcoming set of CPI would be a market mover and a sustained downtrend in the reading could propel the index beyond 16000 with 14700 as the first support.
