On Thursday morning, the Bank of Japan (BoJ) made an announcement that was keenly anticipated by market watchersWith a decisive 8-to-1 vote, the central bank opted to maintain its benchmark interest rateThis decision set the stage for a heightened focus on the bank's outlook regarding the potential trajectory of interest rates in the futureAt a press conference held later in the day, BoJ Governor Kazuo Ueda emphasized that the Japanese economy is experiencing a mild recovery, with inflation projected to gradually riseHowever, he also cautioned that both the economic environment and inflation remain fraught with uncertainty.
Turning to the future monetary policy direction, Ueda noted that the bank would continue to evaluate the regular economic and inflation indicatorsHe also mentioned that trends relating to the annual wage negotiations in the spring of next year, often referred to as “shunto,” as well as the influence of U.S
policies on inflation would be crucial in the bank’s assessmentsCharu Chanana, the chief investment strategist at Saxo Markets, remarked that Ueda’s comments provided "maximum flexibility" for the decision-making process in January, leaving some analysts surprised by his seemingly cautious stance on the sustainability of rising wagesThis sentiment seemed to add a dose of cold water on the expectations for a rate hike in January.
Prior warnings from forex strategists suggested that if the Bank of Japan holds off on raising rates until March or later, there could be further risks of a weakening yenThis reflects ongoing concerns among investors regarding the global economic picture and Japan's position within itThe adjusted monetary policy stances taken by central banks worldwide, particularly the Federal Reserve, could lead to ripple effects in Japan’s currency value.
Meanwhile, a recent report from Japan's Ministry of Internal Affairs and Communications highlighted the pressures faced by consumers
- Dollar Retreats, Oil Prices Rebound
- The Downfall of Japanese Automotive Giants
- Slight Decline in the Dollar Index
- Dollar/Yen Hits Five-Month High
- Embrace Change with Patience
The consumer price index (CPI) for November, excluding fresh food, rose by 2.7% year-on-year, surpassing economists’ expectations of a 2.6% increase, and up from October’s 2.3%. When the effects of energy prices and fresh food are excluded, the core CPI also saw a rise of 2.4%, indicating persistent inflationary pressuresThis data lends credence to the perspective held by certain economists that inflation rates are aligning with the BoJ's target of maintaining rates above 2% over the long termThus, there are growing expectations that the BoJ may incrementally raise interest rates to manage Japan's prolonged monetary easing.
Today's market has its eyes on several key economic indicators, including adjusted retail sales in the UK for November, personal expenditure rates in the U.S., the year-on-year PCE price index for November, October's retail sales data from Canada, the preliminary consumer confidence index for the Eurozone in December, and the finalized consumer confidence index from the University of Michigan in December
Each of these figures can provide insights into the shifting currents of global economic stability.
In the gold market, yesterday's trading saw an upward trend in gold pricesThe daily chart indicated a mild closing uptick, with current prices hovering around 2599. Analysts noted that short-covering played a pivotal role in reversing the prior downward price trajectoryFollowing a period of decline where short positions amassed substantial profits, some traders moved to close their positions, bolstering gold’s upward supportHowever, the persistent hawkish stance from the U.SFederal Reserve has tempered enthusiasm, particularly as market expectations for rate cuts in 2025 have cooled significantly, leading to diminished interest in holding gold as an investmentA slew of strong economic data emerging from the U.S., including robust employment figures and solid GDP growth, further eased perceptions of gold as a safe haven asset, thereby constraining its potential for rebound.
As for the day's trading outlook, significant attention is directed at the resistance level around 2610. Should this level be efficiently breached, it could signal an opening for further upward movement in prices
Conversely, a breach below the support level around 2590 could prompt a re-evaluation of bullish sentiment.
In the USD/JPY pair, yesterday's trading exhibited a notable increase as the currency pair surged to a five-month high, trading around 157.10. The strength of the U.Sdollar index, buoyed by the Federal Reserve's hawkish signals and favorable economic data from the U.S., provided the primary impetus for this rallyAdditionally, the decision by the BoJ to hold rates steady, coupled with dovish undertones from Ueda, reinforced the bullish momentum in this currency pairToday, market attention is focused on the pressure around 158.00, while support is anticipated nearby at 156.00.
In the USD/CAD market, yesterday saw a corrective downturn, with the currency pair trading around 1.4430. The main driver behind the price retreat was profit-taking following earlier gainsNevertheless, the dollar index, underpinned by multiple favorable conditions, marked a 25-month high, and concerns over political uncertainty in Canada, alongside impending tariffs from the U.S., limited the retracement potential for the currency pair