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FOREX: USDJPY Rises 1% on Cautious BOJ, Set to Close Around 144.00

FOREX
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  • As expectations shifted towards the Fed potentially cutting by 50bps, lower core yields helped USDJPY trade below 140.00 on Monday, a new 14-month low for the pair. However, the ongoing positive sentiment for equities and a lack of momentum on the break of this psychological point prompted a firm recovery across the week. This culminated with the Bank of Japan decision on Friday, where Governor Ueda said the BOJ will be patient when adjusting policy. Accordingly, USDJPY rose back to a weekly high of 144.49 and trades around 144.00 as we approach the close.
  • The dollar index trades moderately in the green Friday, however is half a percent lower on the week, broadly reflective of the FOMC’s bold 50bp rate cut, and an extension of the broader bearish technical trend seen across much of July and August. Bolstering this theme, positive sentiment in equity markets continues to weigh on the greenback.
  • EURUSD has risen roughly 0.9% this week, on the back of the softer US dollar and the single currency’s large weighting within the dollar index. While the ECB have left all options on the table, markets are tilting heavily towards the central bank only cutting at a quarterly pace. This caution is underpinning the renewed bid for EURUSD, alongside the positive sentiment for risk overall. 1.1202, the Aug 26 high and the technical bull trigger are yet to be tested.
  • A busy week for the pound where inflation data and the Bank of England decision were in focus. There was a marginally hawkish outcome with the MPC vote split and an ongoing cautious approach to the easing cycle has been underpinning GBP this week, which remains the best performing currency against the dollar this year. Stronger than expected retail sales data on Friday saw GBPUSD rise to 1.3340, a fresh trend high, and the highest level since March 2022.
  • Eurozone PMI's kick off next week's economic calendar.
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  • As expectations shifted towards the Fed potentially cutting by 50bps, lower core yields helped USDJPY trade below 140.00 on Monday, a new 14-month low for the pair. However, the ongoing positive sentiment for equities and a lack of momentum on the break of this psychological point prompted a firm recovery across the week. This culminated with the Bank of Japan decision on Friday, where Governor Ueda said the BOJ will be patient when adjusting policy. Accordingly, USDJPY rose back to a weekly high of 144.49 and trades around 144.00 as we approach the close.
  • The dollar index trades moderately in the green Friday, however is half a percent lower on the week, broadly reflective of the FOMC’s bold 50bp rate cut, and an extension of the broader bearish technical trend seen across much of July and August. Bolstering this theme, positive sentiment in equity markets continues to weigh on the greenback.
  • EURUSD has risen roughly 0.9% this week, on the back of the softer US dollar and the single currency’s large weighting within the dollar index. While the ECB have left all options on the table, markets are tilting heavily towards the central bank only cutting at a quarterly pace. This caution is underpinning the renewed bid for EURUSD, alongside the positive sentiment for risk overall. 1.1202, the Aug 26 high and the technical bull trigger are yet to be tested.
  • A busy week for the pound where inflation data and the Bank of England decision were in focus. There was a marginally hawkish outcome with the MPC vote split and an ongoing cautious approach to the easing cycle has been underpinning GBP this week, which remains the best performing currency against the dollar this year. Stronger than expected retail sales data on Friday saw GBPUSD rise to 1.3340, a fresh trend high, and the highest level since March 2022.
  • Eurozone PMI's kick off next week's economic calendar.