The daily reports for important events that affects the forex, stocks and commodities markets.

23/08/2024 Daily Reports

Yen Strengthens as BOJ Signals Rate Hike Path; Asian Stocks Mixed Ahead of Powell's Speech

The yen led gains among G-10 currencies, rising 0.5% to 145.62 per dollar after Bank of Japan Governor Kazuo Ueda indicated possible further interest rate hikes if economic conditions align. Japanese bond futures fell, and stocks fluctuated as traders assessed the BOJ’s stance on monetary policy.

Analysts noted Ueda’s comments were more hawkish than expected, suggesting a gradual approach to rate hikes. While Ueda didn’t signal an imminent increase, nearly 70% of economists predict another hike this year. Markets now await Fed Chair Jerome Powell’s speech for further direction. The yen’s strength will largely depend on U.S. data and Powell’s remarks.

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The yen rose on Friday as Bank of Japan Governor Kazuo Ueda sought to reassure markets after last month’s surprise rate hike, emphasizing that further increases could occur if inflation meets the 2% target. His comments helped calm investor nerves, especially after the July rate hike disrupted the popular yen carry trade and triggered a global market selloff. The yen’s strength contrasts with the U.S. dollar, which remains close to its 2024 low as traders anticipate potential interest rate cuts by the Federal Reserve.

Meanwhile, the dollar index saw a slight decline, with markets pricing in a 73.5% chance of a 25 basis point rate cut by the Fed in September. Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium is highly anticipated, with expectations that he will maintain a balanced approach while signaling the possibility of rate cuts later this year. The euro and sterling remained strong, reflecting expectations of fewer rate cuts by the European Central Bank and the Bank of England compared to the Fed.

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The Federal Reserve Bank of Kansas City’s annual gathering in Jackson Hole, Wyoming kicked off Thursday evening with a dinner filled with central bankers, economists and reporters from the around the world. Here’s what to expect from the three-day conference: For investors and Fed watchers, Chair Jerome Powell’s keynote speech on Friday at 10 a.m. New York time will garner the most interest.
With the Fed on the cusp of lowering borrowing costs from a more than two-decade high, Powell’s comments will be closely parsed for any kind of signal about the timing, size and pace of interest-rate cuts. Any remarks that offer insight into his views on the labor market, and how risks of further weakness stack up against inflation concerns, will also be scrutinized.

Oil headed for a weekly loss — after hitting the lowest close since January midweek — on a challenging demand outlook, sinking product prices, and US efforts to secure a cease-fire in Gaza. Brent crude traded above $77 a barrel, about 3% lower this week, while West Texas Intermediate was near $73. Data this week showed US manufacturing contracting at the fastest pace this year, as well as signs of labor market softness. In Europe, meanwhile, futures for diesel — a workhorse industrial fuel — have retreated to the lowest level in 14 months.
Oil has shed all of its year-to-date gains as the impact of OPEC+ supply curbs has been overshadowed by a poor economic outlook in major economies, with China showing signs of weakness along with the US. While the cartel led by Saudi Arabia and Russia has said it aims to ease some output curbs in the fourth quarter, crude’s slide makes that plan more challenging.

The yen rose against the dollar after Bank of Japan Governor Kazuo Ueda reaffirmed the BOJ’s readiness to raise interest rates, provided inflation and economic conditions align with forecasts.

Asian stocks saw mixed results, with Chinese shares helping to offset earlier losses in the region, while Japanese and Hong Kong equities trimmed gains.

Investors are now focused on Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium, which could provide further insights into the Fed’s rate-cutting trajectory.

Meanwhile, commodities like oil faced weekly losses amid a challenging demand outlook.