Asia wrap: Bank of Japan crosses the Rubicon, but traders say lets wait for the Fed
As the Bank of Japan (BoJ) made significant policy changes, crossing what can be seen as a Rubicon in its monetary approach, the moves had been extensively communicated to the market beforehand. Consequently, the adjustments were largely anticipated, and the markets had priced them in almost perfectly. And observing the limited moves in Japanese financial markets, it appears that the traders are putting more weight on the Federal Open Market Committee (FOMC) than today’s developments.
Undoubtedly, the decisions of other central banks are significant, yet they are likely to be overshadowed by the outcome of the Federal Reserve's meeting on Wednesday and the subsequent analysis of its stance on interest rates and its balance sheet. Market participants have already tempered their expectations regarding the extent of anticipated easing measures.
Indeed, ahead of the Federal Reserve meeting, markets showed a tendency to moderate expectations for potential rate cuts. This adjustment led to a slight strengthening of the Dollar , while US 10-year yields reached 4.33%. Despite yield headwinds, the equity market seems unbothered. However, the surge in oil prices, which soared to US$86 per barrel, poses a potential complication for the inflation landscape. This elevation in prices comes in light of disruptions to Russian oil refining capacity stemming from drone strikes.
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
