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On August 25th, following Federal Reserve Chairman Powells speech at Jackson Hole last week, the market and the Fed appear to have reached a consensus on a September rate cut. However, data released before the decision will still influence the direction of the dot plot—specifically, whether it will ultimately indicate a cumulative rate cut of 75 basis points for the year (implying two more cuts after the September cut) or 50 basis points (only one after September). Wrightson ICAP macro analysts wrote: "We speculate that the median dot plot for 2025 may again indicate only two rate cuts for the year, but against the backdrop of a changing risk landscape, the median point may shift downward, suggesting a cumulative rate cut of 75 basis points by year-end."The annualized monthly rate of new home sales in the United States in July was -0.6%, compared with 0.60% in the previous month.Russian Ministry of Defense: Air defense forces shot down one Ukrainian drone each in the Black Sea, Kursk, Oryol and Belgorod regions.On August 25, US President Trump criticized South Koreas political instability on Monday, which cast a potential shadow on the South Korean presidents visit to the US to discuss a framework trade and investment agreement. Trump posted on social media: "What is happening in South Korea? It looks like a purge or revolution. We cant do business with them under such circumstances." Trump was scheduled to meet with South Korean President Lee Jae-myung on Monday, but made the above remarks hours before the meeting. Before leaving for the US, Lee Jae-myung hinted that the talks might be full of variables, warning that US officials believed that the tariff agreement reached in July was too biased towards Seoul. He told reporters on the presidential plane: "Some people in Washington believe that the agreement is too favorable to South Korea, and different departments are requesting modifications. We cannot simply accept attempts to unilaterally restart the agreement approved by the two presidents."Hungarian Prime Minister Viktor Orbans chief of staff said the European Commission pledged in January to take measures to counter attacks on energy infrastructure.

On dovish BOJ bets, AUD/JPY seeks to retake a seven-year high above 97.00

Daniel Rogers

Jul 20, 2022 12:02

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The AUD/JPY currency pair is on course to retake its seven-year high of 96.90 after extending its five-day winning run. Due to the increasing potential of a wider policy divergence between the Reserve Bank of Australia (RBA) and the Bank of Japan, market participants have raised the risk barometer (BOJ).

 

Following the publication of the RBA's July monetary policy minutes, the Australian dollar is performing well against the Japanese yen. RBA officials offer harsh guidance in light of the intensifying price pressures in the Australian economy. While establishing price stability as soon as feasible is the RBA's goal.

 

RBA Governor Philip Lowe is now presenting at "The Australian Strategic Business Forum - Melbourne" on the topics of inflation, productivity, and the future of money. The comments RBA made According to Lowe, investors could expect higher inflation in June. The RBA will require more rate increases over the coming months in an effort to reduce pricing pressure.

 

This week, the Australian S&P PMI data will be the most important. The Manufacturing PMI may rise to 56.4 from its previous reading of 56.2. The Services PMI has increased from its previous reading of 52.6 to a current value of 55.

 

The headline-grabbing event on the Tokyo front will be the BOJ's announcement of its interest rate decision on Thursday. Given that the Bank of Japan is committed to increasing aggregate demand, Governor Haruhiko Kuroda is expected to make dovish comments. The central bank's goal is to keep inflation over 2%, and in order to do this, the wage price index must rise. This is because a higher inflation rate and lower pay levels might magnify the real income shock.

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