Daily Market Update

Buck dwindles Bank of Japan surprises

September 22, 2022

The U.S. Dollar is trading in weaker ranges following intervention from other central banks after the Fed’s policy meeting and presser. 

Overview

The Swiss, Norwegian, and U.K. central banks hiked interest rates and vowed to combat inflation as needed. Initially, Fed Chairman Jerome Powell’s warnings about a prolonged period of low growth sank all peers against the dollar, but today’s reaction seems to be in line with our thinking that the Fed is quite predictable and other regions of the world have room for improvement. Indeed, the geographical advantage of the U.S., along with its established financial dominance, are keeping the buck buoyant and mostly unchanged from where it was prior to the meeting.In terms of domestic data, both Initial and Continuing Jobless Claims came in lower than expected as the labor market continues to show consistency. We will get a glance at what suppliers are dealing with September Producer Price Index figures tomorrow. We will see how much of a hard landing the economy will experience, but for now, the uncertainty remains about when cooling down the economy will also significantly dent price growth.

 

What to Watch Today…

  • No major economic events are scheduled for today

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JPY ⇑

The Yen is up by 2.0% as the globe digests the first FX intervention executed by the Bank of Japan since the year 1998. Officials have approved the moving of some of their foreign currency reserves in order to ease the depreciation that the JPY has seen this year, at one point representing a decline of 20.0%.

Unlike other central banks, the Bank of Japan refuses to tighten terms of monetary policy and believes that avoiding a major recession is important thus, they want to keep things accommodative in Japan’s markets. We will watch for any other intervention as currencies fear freefall.

 

GBP ⇑

The Sterling failed to recover much of its value after the Bank of England made the split decision to hike interest rates by 50-basis-points to 2.25%. There were three members that wanted the 75-bps increment and just one that felt 25bps would be good enough. Inflation’s damage is scaring plenty, and there is growing anxiety over what the budget will reveal tomorrow.

Furthermore, recessionary fears are manifesting themselves in poor data while the BOE wonders how much more the economy can take in terms of higher borrowing costs.

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