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On December 18th, Jim Smigiel, Chief Investment Officer of SEI, stated in a report that the war against inflation is not yet won, which could keep inflation-sensitive assets in demand. While the worst concerns about tariffs have not yet materialized, SEI expects the lagged effects of tariff increases to continue pushing up inflation in the coming months and quarters. He stated, "We believe investors should continue to invest in inflation-sensitive assets in 2026. The reflationary environment should favor commodities and value stocks, as the Great Beauty Act boosts U.S. consumer spending."On December 18th, Futures News reported that an armed attack on a mine in Plateau State, central Nigeria, may have resulted in at least 12 deaths, 5 injuries, and 3 kidnappings. Reuters, citing the head of a Belom youth organization, reported that the attackers, possibly Fulani militants, attacked a mine in Atoso village, Plateau State, on the evening of the 16th. The organization also urged the government to deploy more security forces and enforce the ban on open grazing. Plateau State police have launched an investigation into the incident. In Plateau State, Fulani herders and Belom farmers frequently clash over land control.The head of a Japanese banking lobbying group said that the Bank of Japan is highly likely to raise interest rates this time.On December 18th, the Peoples Bank of China (PBOC) conducted 88.3 billion yuan of 7-day reverse repurchase operations in the open market, maintaining the interest rate at 1.40%, and simultaneously conducted 100 billion yuan of 14-day reverse repurchase operations. Wang Qing, chief macro analyst at Orient Securities, stated that with the year-end approaching, the PBOCs decision to conduct 14-day reverse repurchase operations at this time is customary. This is mainly due to increased liquidity disturbances caused by factors such as bank assessments, fiscal revenue and expenditure, and residents cash withdrawals around the year-end. The PBOCs 14-day reverse repurchase operations can effectively smooth out fluctuations in the money market and guide market liquidity to a relatively stable and ample state. The market has high expectations that the PBOC may implement a new round of reserve requirement ratio (RRR) cuts early next year. Considering the current economic and financial situation and monetary policy orientation, it is expected that the PBOC may announce an RRR cut in January 2026, with an estimated reduction of 0.5 percentage points, injecting approximately 1 trillion yuan of long-term liquidity into the market. This would support large-scale bank lending at the beginning of next year while also taking into account liquidity arrangements for the Spring Festival, signaling a strengthening of pro-growth policies.December 18th - 1. Due to the previous government shutdown, the CPI report will be incomplete, possibly only reporting November price levels. 2. Limited data reduces reliability, creating uncertainty regarding monthly inflation details. 3. Inflation may slow; tariffs boosted core commodity prices, but seasonal discounts limited prices. 4. Markets may react briefly, but incomplete data limits its lasting impact on Federal Reserve expectations.

Even as the BoJ vs. Fed Difference Remains in the Spotlight, USD/JPY Tracks Below 134.00 on Lackluster Yields

Alina Haynes

Apr 17, 2023 14:02

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As Monday begins in Tokyo, USD/JPY falls from its intraday high and stabilizes around 133.80. As a consequence, the Yen pair is unable to extend its previous day's gains due to lax market conditions preceding this week's key data/events. In addition to a paucity of significant data or events, USD/JPY traders have recently struggled with inconsistent triggers and sluggish returns.

 

The previous day, USD/JPY reached its highest level in a week as primarily positive US data dampened expectations for a policy shift and rate cut by the Federal Reserve (Fed) in 2023. Despite this, US retail sales decreased by 1.0% in March compared to the predicted -0.4% decline and February's -0.2% decline. As opposed to the 0.2% market consensus and previous reading, Industrial Production increased by 0.4% in the month in question. The preliminary result of the University of Michigan's (UoM) Consumer Confidence Index for April, which increased to 63.5 from 62.0 analysts' expectations and previous readings, was also encouraging. In addition, inflation forecasts for the next year increased from 3.6% in March to 4.6% in April, while inflation forecasts for the next five years decreased by 2.9% during the same month.

 

Previously, the USD/JPY pair increased due to hawkish Fed discussions. In an interview with Reuters on Friday, Raphael Bostic, president of the Atlanta Federal Reserve (Fed), stated that "recent developments are consistent with one more rate hike." According to Reuters, Fed Governor Christopher Waller discussed this topic and stated that additional rate hikes are necessary because the Fed has not made significant progress toward its inflation objective. In an interview with CNBC on Friday, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated that he still needs to examine the statistics. The lawmaker said, "However, let's keep in mind that we've raised a lot of money; some of the delay may be reflected in today's retail sales number."

 

In contrast, the USD/JPY pair was able to maintain its strength due to the new Governor of the Bank of Japan (BoJ), Kazuo Ueda, who supports the Japanese central bank's easy-money policy.

 

Recent geopolitical tensions between China and the United States over Taiwan, as well as China's desire to collaborate with Russia to enhance regional and global security, have weighed on the USD/JPY pair and agitated the market.

 

S&P 500 Futures struggle to find a clear direction amidst these wagers following Wall Street's pessimistic close, as bond yields remain neutral despite weekly gains.

 

The preliminary readings of the US PMIs for April and the Japanese National Consumer Price Index (CPI) for March will be crucial to monitor going forward. The previously mentioned risk factors and central banker comments are also significant.


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