The BOJ underwhelmed the market yesterday by opting to make only minor changes to policy, moving the 10 Year JGB to a flexible rate rather than changing the target rate, causing US$Jpy to jump by about 30bp in the Asian afternoon yesterday. Yen weakness continued to be the main theme through the balance of the session in the currency markets, with the Aud and the Kiwi in particular both making decent gains on their respective crosses as a positive risk-sentiment/yield-play returned. Elsewhere, the Euro initially made some solid gains after an upside surprise in the Q2 EU inflation (2.1%yy vs 2.0% expected, Core; 1.1%yy v 1.0% exp), but then eased back late in the day with the dollar making some mild gains against all the EU majors.
Stocks had a positive day on news that the US/China may be making headway on the tariff talks, and had a late boost after Apple beat expectations in their Q2 results (Q2 EPS $2.34 (exp. $2.18), Revenue $53.27bln (exp. $52.34bln)). Oil was sharply lower (-2%), on easing expectations for losses of Iranian crude supply after Donald Trump’s offer to meet the Iranian leadership. Gold had a spiky session, dipping sharply to 1214 before an equally sharp move up to 1228.50 and then settling more or less unchanged at 1224.
Wednesday will be another busy one, with the focus being on the FOMC Meeting, due late in the session. The Fed is widely expected to stand pat, while reaffirming the outlook for further gradual rate rises, and the market is almost fully priced by now for a hike in September and then leaning towards a further move before year-end. Ahead of the FOMC, the day begins with the NZ Q2 Jobs data (exp 0.4%qq/4.4%yy), the Australian Manufacturing Index for July, the TD Inflation Outlook, RBA Commodity Price Index and the China Caixin Manufacturing PMI (exp 50.8). The EU will focus on the manufacturing PMIs, while the US, aside from the FOMC Meeting, will also see the ADP figures (exp 175K), the ISM Mfg/Prices Paid figures (exp 59.8/76.1), the June Construction Spending (0.3%) and July Vehicle Sales (17.3 mio). Have a good day.
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