Daily Digest Market Movers: Japanese Yen depreciates despite increased odds of BoJ rate hikes

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  • The USD/JPY pair gains ground as the US Dollar (USD) breaks its four-day losing streak due to ongoing market caution amid uncertainty leading up to the upcoming US presidential election. However, the Greenback encountered difficulties following the release of the Personal Consumption Expenditures (PCE) Price Index data on Thursday.
  • The US Personal Consumption Expenditures (PCE) Price Index showed that core inflation increased by 2.7% year-over-year in September. Additionally, Initial Jobless Claims dropped to a five-month low of 216,000 for the week ending October 25, signaling a robust labor market and lessening expectations for imminent rate cuts by the Federal Reserve (Fed).
  • The Bank of Japan decided to keep its short-term interest rate target at 0.25% following the conclusion of its two-day monetary policy review on Thursday. This decision was in line with market expectations for maintaining stability.
  • According to the BoJ Outlook Report for Q3, the central bank plans to continue raising policy rates as long as the economy and prices align with its forecasts, particularly given that real interest rates are currently very low. The Bank of Japan aims to conduct monetary policy with a focus on sustainably and stably achieving its 2% inflation target.
  • US Gross Domestic Product (GDP) annualized expanded by 2.8% in Q3, below 3.0% in Q2 and forecasts of 3.0%. The ADP Employment Change report showed that 233,000 new workers were added in October, marking the largest increase since July 2023. This followed an upward revision to 159,000 in September and significantly exceeded forecasts of 115,000.

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