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BOJ’s Ueda Underpins USDJPY Recovery, NZD Underperforms

FOREX
  • Despite some intra-day volatility, overall adjustments across G10 currency markets remained limited on Tuesday with the USD index around a tenth of a percent higher as we approach the end of the session.
  • The modest USD strength on Tuesday comes in the face off higher major equity benchmarks as the greenback looks to take a breather from its recent weakening trend. Perhaps the most notable intra-day move was for USDJPY, both following the US retail sales data release and after BOJ headlines hit the wires.
  • The weaker headline US retail sales prompted a quick selloff to lows of 137.70, however as details of the release (including a much firmer control group) transpired, USDJPY bounced sharply to trade as high as 138.60 shortly afterwards. The pair then gradually softened back below the 138.00 mark before BOJ headlines hit the wires and prompted another bout of significant JPY selling.
  • BOJ’s Ueda stated that there was still some distance to sustainably and stably achieving the central bank's 2% inflation target, signalling his resolve to maintain ultra-loose monetary policy for the time being. USDJPY traded as high 139.14 on the back of the move, before declining around 30 pips ahead of the close.
  • NZD remains the poorest performer across G10, despite the buoyant equity markets. This has helped keep NZD/SEK under pressure and extend its recent losing streak. The cross has fallen in 8 of the past 9 sessions, now sitting at the lowest levels since mid-May.
  • UK inflation data takes focus on Wednesday where the majority of analyst previews seen by MNI look for headline CPI to fall from 8.7%Y/y to 8.1%Y/y. Elsewhere, final Eurozone CPI will also be released, as well as US housing starts for June.
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