We review the market reaction following the US monetary policy announcement, the direction of the US dollar, Japanese yen and euro, and the Bank of Japan announcement due tomorrow.
In market moves through today, US dollar buying, yen selling and euro selling strengthened from the start of the week, sending dollar/yen up to the ¥158 level. Subsequently, following the FOMC announcement and Fed Chair Worsh's press conference, US dollar selling gained momentum, sending dollar/yen back down to the upper ¥157 range, while euro/dollar recovered to the mid-$1.11 range.
Key factors include the market having digested the US monetary policy announcement yesterday, earnings announcements from major US companies entering full swing, and the ECB policy rate announcement and President Lagarde's press conference in the euro area. Key economic indicators due to be released and attracting attention include US initial jobless claims, the PCE deflator, the core PCE deflator and the preliminary third-quarter GDP figure. The 7-year Treasury auction is also a focus.
In Europe, the ECB has decided to leave interest rates unchanged, and President Lagarde's press conference is expected to influence the market reaction. In Japan, the Bank of Japan's monetary policy announcement is due tomorrow, the 30th, making policy developments in Japan, the US and Europe a focus for markets.
Looking ahead, movements in US long-term interest rates and the direction of the US dollar, Japanese yen and euro remain important. Market conditions during the week are likely to be particularly affected by US policy and economic data announcements and Japan's policy announcement. Attention is also needed on market reactions ahead of Japan's policy announcement and movements in major equity markets.