The USD is the strongest and the JPY is the weakest as the NA session begins

As the North American session begins, the USD is the strongest and the JPY is the weakest.

The BOJ did what they were expected to do:

• They moved short term interest rate target from -0.1% to 0.0% to 0.0% to +0.1%
• They ‘stopped’ Yield curve controls which pegged the upper bound of the 10 year yield at 1.0%. There is no upper peg now but the BOJ said that they will continue its JGB purchases with broadly the same amount as before. The 10 year yields is trading at 0.736%.
• They discontinued purchases of ETF and J-REITs

The USDJPY after some up and down volatility surged to the topside and in the process took the price up toward the ceiling area from February and early March. That area comes between 150.718 to 150.879. The high price reached 150.685.

After the decision, BOJ Governor Kazuo Ueda provided insights into Japan’s current monetary policy landscape during his normal press conference. He highlighted that the Bank of Japan’s (BOJ) Quantitative and Qualitative Easing (QQE) measures, including negative interest rates and yield curve control (YCC), have successfully fulfilled their intended purposes. Despite this achievement, Ueda emphasized the continuation of accommodative financial conditions for the foreseeable future, acknowledging a virtuous cycle of wages and prices that indicates the sustainable achievement of the BOJ’s 2% inflation target is now within reach. The BOJ plans to maintain its current pace of Japanese Government Bond (JGB) purchases while focusing on the short-term policy rate as its primary monetary policy tool. The decision on further rate hikes will be contingent upon economic and price outlooks, with a cautious approach towards the potential reduction in JGB purchases in the future. Ueda mentioned that the probability of hitting the 2% price target is increasing, though not yet guaranteed, and discussed the possibility of gradual rate increases. The expansion of wage hike trends, particularly among smaller firms, remains a critical factor for future policy decisions, though confidence in widespread wage increases across smaller businesses is not yet solidified.

Wishy-washy to me….

Meanwhile the RBA kept rates unchanged as expected

The Reserve Bank of Australia has left the cash rate on hold at 4.35%, as was unanimously expected:

• At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.25 per cent.

The RBA has dropped the wording that a further hike “cannot be ruled out”.

Now they say:

• “The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out”.

In her press conference, RBA Governor Michelle Bullock provided an update on Australia’s monetary policy and the ongoing battle against inflation. She acknowledged progress in addressing inflation, though it remains elevated, suggesting that recent data indicates movement in the right direction. Bullock stressed the need for greater confidence that inflation would return to the target within a reasonable timeframe, describing the risks to the economic outlook as “finely balanced.” She highlighted a shift in the Reserve Bank of Australia’s (RBA) language regarding future guidance, reflecting a data-driven approach to policy decisions. Despite not having sufficient confidence to dismiss any potential interest rate adjustments, Bullock expressed optimism about being on the path to achieving inflation targets.

Bullock also elaborated on the dynamic nature of the economic environment, indicating that the RBA is actively responding to incoming data. She reiterated the presence of risks on both ends of the policy spectrum, with inflation still above the target and services inflation remaining high, contrasting with signs of slowing consumption and easing labor market tightness. Given these conditions, Bullock emphasized that the RBA cannot definitively rule any policy actions in or out at this stage, underlining the necessity for increased confidence in inflation’s downward trajectory before considering rate cuts.

The Nvidia Developers Conference and speech by Jenson Huang came and went and the price of Nvidia shares moved lower (shares are trading down -2.2% at $865). That has led to a negative tone in the stock market after gains yesterday. Yields in the US are lower. Crude oil is near unchanged.

A snapshot of the markets as the North American session begins currently shows:

• Crude oil is trading down eight cents or -0.11% at $82.09. At this time yesterday, the price was at $81.11
• Gold is trading down $4.60 or -0.19% at 215-6132. At this time yesterday, the price was at $2160
• Silver is trading down nine cents or -0.38% at $24.93. At this time yesterday, the price was at $25.17
• Bitcoin currently trades at $63,525. Last week the price reached a new all-time high at $73,794. At this time yesterday, the price was trading at $68,425.

In the premarket, the major indices are trading lower.

• Dow Industrial Average futures are implying a loss of -84.43 points. Yesterday the index rose 75.66 points or 0.20% at 38790.44
• S&P futures are implying a loss of -20.17 points. Yesterday, the index rose 32.33 points or 0.63% at 5149.43
• Nasdaq futures are implying loss of -120 points. Yesterday, the index rose 130.27 points or 0.82% at 16103.45

In the European equity markets, the major indices are trading mostly higher.

• German DAX, +0.11%
• France CAC , +0.31%
• UK FTSE 100, -0.18%
• Spain’s Ibex, +0.57%
• Italy’s FTSE MIB, +0.37% (delayed by 10 minutes).

Shares in the Asian Pacific markets were mixed:

• Japan’s Nikkei 225, +0.66%
• China’s Shanghai Composite Index, -0.72%
• Hong Kong’s Hang Seng index, -1.24%
• Australia S&P/ASX index, +0.36%

Looking at the US debt market, yields are lower:

• 2-year yield 4.717%, -1.9 basis points. At this time yesterday, the yield was at 4.714%
• 5-year yield 4.339%, -1.6 basis points. At this time yesterday, the yield was at 4.327%
• 10-year yield 4.324%, -1.6 basis points. At this time yesterday, the yield was at 4.308%
• 30-year yield 4.453%, -1.3 basis points. At this time yesterday, the yield was at 4.435%
• The 2-10 year spread is at -39.3 basis points. At this time yesterday, the spread was at -40.7 basis points
• The 2-30 year spread is at -26.5 basis points. At this time yesterday, the spread was at -27.9 basis points

European benchmark 10-year yields are mostly lower:

This article was written by Greg Michalowski at www.forexlive.com.