The yen rose as much as 0.7% against the dollar overnight in response to Ueda addressing lawmakers and explaining that the BoJ's stance on raising interest rates has not changed. However, he reassured investors that further hikes would depend on market conditions after the July hike triggered a global equity selloff. Government bond futures fell in Japan while the Topix gained. Japanese inflation data also exceeded expectations earlier, with consumer prices rising 2.8% year-on-year, higher than the 2.7% expected.
Out with the hawks and in with the doves—focus now fully shifts to Powell's address later at Jackson Hole. Currently, the 10-year Treasury yield is 3.85%, while the shorter end, more sensitive to policy changes, is at 3.99%, down 6 bps in a week. The markets remain very dovish, with around 100 bps of cuts priced in by the end of the year in the futures markets. Powell would have to be particularly dovish to surprise anyone, but it seems that any hawkish sentiment would be the most likely route to spook investors.
In commodities, oil is on track for a weekly loss after hitting its lowest close since January midweek, all due to concerns over the demand outlook amid ongoing US efforts to secure a ceasefire.
Today we have:
- US new home sales
- Jackson Hole Symposium - J. Powell speaking
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