- Data released by the BoJ yesterday suggests that the central bank did as rumoured intervene in the FX market on Monday. The BoJ’s high frequency data and central bank account balances suggest that via the MoF officials bought the Japanese yen to support the currency after it had fallen so much against the US dollar. The pair is still elevated, trading close to 158, but it is felt that Japanese officials will likely wait until after the FOMC decision before deciding to intervene once more.
- Ahead of the FOMC today the US dollar has posted gains against its G10 peers with the dollar index extending its best daily gain in almost three weeks. The lack of UK data has helped push GBPUSD below 1.25, with the next support level seen at 1.2450. Data released yesterday showed that inflation in the euro area is moving in the right direction with April’s CPI print coming inline with expectations and the core reading coming in slightly lower. GDP data beat expectations showing that the economy is standing up well to high interest rates suggesting that the ECB is set to kick off significant easings in the coming months.
- All eyes will be on the Federal Reserve later this evening as they conclude their two-day policy meeting. No change in rates is expected but close attention will be paid to the language of the accompanying statement, with markets looking for subtle changes to the tone with regards to the outlook for inflation. A hawkish tone is expected following recent hot inflation and PCE data, with the first cut from the central bank pushed out to at least the November meeting.
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