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BoJs Ueda sends Yen marching higher

Good morning


It was a fairly quiet day in the currency markets yesterday with pretty tight ranges seen in the majors, although after the London close we saw GBPUSD dip to 1.2570. We’d normally put this down to USD buying but GBPEUR was a few points lower as well, down at the 1.1665 area, so we could see this as GBP weakness rather than USD strength. It’s not a major issue, we are only talking about a few points really which make little difference in the scheme of things.


However GBP’s very slight fall against EUR comes despite ongoing talk of ECB rate cuts, not for December but certainly April 2024 is getting a lot of attention. Next week we have what should be a busy week, with Fed rate announcement on Wednesday and both ECB and BoE Thursday. Last year each central bank raised rates 50bps at their December meetings, this time we are looking at no change from any of them. The tone of their statements will be key, particularly with so much attention on possible rate cuts in 2024.


On the subject of rate announcements, BoC kept rates unchanged as widely expected yesterday, USDCAD hardly reacted at the time, ending the London session just 20 pips or so higher at 1.3580. Many see BoC as being one of the first major central banks to cut rates. We hear from BoCs Macklem and Gravelle later today, will be interesting to see if they continue with the mildly dovish tone.


Yen has had something of a recovery, with USDJPY trading down from a close yesterday around 147.35 to hit 145.15 this morning. BoJs Ueda was speaking, I didn’t think his comments were particularly hawkish, making it clear they will continue with easy monetary policy amid a very uncertain domestic economy. However his mention of the end of negative rates, even talk of putting rates into positive territory, has sent Yen marching higher. USDJPY is now at levels last seen in Sept 2023 and with talk of US rates having maybe reached a peak, and potential for higher Japanese rates, the market will be eyeing the summer lows in USDJPY which came in around 137.20.


Exactly this day last year I reported that Goldmans were calling the chances of a US recession as something in the region of 65%. While 2023 hasn’t exactly been a dream, the US has avoided a recession so far. Indeed, while we are not fully through 2023 yet, we do all seem to have got through what many were suggesting would be a very difficult year. It’s not been easy, but high interest rates and high energy prices didn’t send economies spiralling down as many had expected.


Plenty of focus on China recently, no surprise given it is the second largest economy in the world. China trade balance released overnight shows a surplus of US$68.4bn, some US$10bn higher than expected. USDCNY fixed below market levels once again at 7.1176, against market levels around 7.1600, Italy has officially withdrawn from China’s Belts and Roads initiative. It was a slightly odd move from Italy when it did sign up back in 2019, the only G7 nation to do so. The Italy u-turn comes just as EU’s von der Leyen is due to meet China President Xi. Von der Leyen has said China remains an important trading partner.


Not the busiest economic calendar today, we do have some US employment numbers today but markets really waiting for the US nonfarms tomorrow. Until then focus will be on USDJPY and whether this already significant move gains more traction.



- 10.00 EU GDP, employment change

- 12.30 US challenger job cuts

- 13.30 US initial jobless claims

- 17.30 BoCs Gravelle speaks

- 17.40 BoCs Macklem speaks

- 23.50 Japan GDP

- 07.00 EU HICOP


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