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The Eurozones seasonally adjusted current account for July will be released in ten minutes.Interest Rate Decision: 1. Interest Rate Decision: The Bank of Japan raised interest rates by 25 basis points as expected. 2. Voting Ratio: 7-2, with Asada and Sato dissenting on the interest rate decision. 3. Forward Guidance: The Bank of Japan will continue to raise interest rates based on economic and price developments and financial conditions. It will review the situation in the Middle East, the demand for artificial intelligence, and the impact of foreign exchange on the economy and prices to formulate policy. 4. Economic Outlook: The Japanese economy is recovering moderately, but it cannot be simply stated that the economic situation is strong. 5. Inflation Outlook: Inflation expectations have risen moderately. Wholesale inflation remains high due to the impact of oil, foreign exchange, and artificial intelligence demand, and there is a risk that underlying inflation will exceed the 2% target. 6. Artificial Intelligence: The Bank of Japan will closely monitor the demand for artificial intelligence, which has an impact on inflation. Press Conference: 1. Interest Rate Outlook: The Bank of Japan will continue to raise interest rates based on economic, price, and financial conditions; it is not considering raising rates at a specific time, and there is no predetermined pace of rate hikes; it does not rule out any specific policy measures, depending on the inflation situation. 2. Economic Outlook: The Japanese economy is likely to continue to grow moderately, and overall financial conditions remain loose. The degree of looseness is diminishing. 3. Inflation Expectations: There is a risk that potential inflation will exceed the 2% target, and the risk of inflation overshooting is rising. The situation in the Middle East is a factor that increases inflation risk. 4. Internal Disagreements: It is normal for committee members to have differing views. Disagreements in this decision-making process are not a problem.Note: The press conference of Bank of Japan Governor Kazuo Ueda has ended.Bank of Japan Governor Kazuo Ueda: However, exchange rates may fluctuate due to various temporary factors such as changes in interest rates.Bank of Japan Governor Kazuo Ueda: The credibility of a nations currency depends on whether the inflation rate is effectively controlled.

EUR/USD Expects Fourth Weekly Gains Above 1.0900 Despite The US Dollar's Rebound Advance Ahead Of US NFP

Daniel Rogers

Apr 07, 2023 11:42

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Despite a recent retreat, the EUR/USD bulls maintain control around 1.0920. This reflects the typical Good Friday inactivity and apprehension ahead of the US Nonfarm Payrolls (NFP) report released early in the day. The major currency pair was volatile on Thursday as a result of the US Dollar's initial rebound on fears of a recession, but ended the day unchanged as disappointing US data contrasted with stronger Eurozone data.

 

Fears of a recession in the world's largest economy were prompted by consecutive lackluster US data and falling US Treasury bond yields, giving USD bears a reprieve on Thursday morning. As traders prepared for the all-important NFP, the dollar's subsequent gains were reversed by another disappointing US employment report.

 

Despite this, US Initial Jobless Claims for the week ending March 31 rose to 228K from 200K anticipated and an upwardly revised 246K the prior week. Notable is the increase in Challenger Job Cuts from 77,77K to 89,703K in the given month.

 

Notably, Reuters fanned fears of a recession by citing the most recent decline in the preferred bond market indicator of Federal Reserve (Fed) Chairman Jerome Powell. The most reliable bond market indicator of an imminent economic contraction, according to Federal Reserve research, is the "near-term forward spread" between the forward rate on Treasury bills 18 months from now and the current yield on three-month Treasury bills.

 

According to Reuters, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated in prepared remarks on Thursday that the global economy is projected to expand by less than 3% in 2023, a decrease from 3.4% in 2022.

 

In other news, Germany's Industrial Production (IP) increased 0.6% year-over-year in February, versus market predictions of -2.7% and previous readings of -1.7%. Additionally, the monthly figures exceeded expectations by 0.1%, coming in at 2.0% compared to 3.7% previously. On Wednesday, Germany Factory Orders for February improved to -5.7% YoY from -12.0% previously revised down and -10.5% market expectations, while MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings.

 

Wall Street and US Treasury bond yields have both reduced weekly losses as a result of these strategies, but investors remain skeptical.

 

In the context of less liquidity surrounding the March US employment report, sporadic activity on the major markets can keep the EUR/USD inactive and prone to abrupt price swings. Notable is the fact that recent dovish Fed forecasts and disappointing US data generate expectations for a positive surprise and enormous price volatility thereafter.


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