Happy Halloween! What will spook the markets today? Overnight, the BOJ kept its benchmark interest rate unchanged after uncertainties increased over the economic outlook and the stability of the government following the ruling coalition's worst electoral result since 2009. BOJ Governor Kazuo Ueda stated that the bank continues to see economic growth above potential. The trim in the FY25 inflation forecast was attributed to lower oil prices, while the price trend remains aligned with the BOJ’s goal. The bank "will continue to raise rates if the outlook is realized" but noted there's no preconception about the timing. USDJPY opens at 152.30.
GBPUSD has also been volatile; the reaction to the budget has been a case of selling into rallies. Rachel Reeves emphasized the need for productivity and growth, planning for more investment in public services. However, it’s hard to ignore that UK government debt is now very close to 100% of GDP. The BoE is widely expected to cut rates by another 25bps on November 7, but will this be enough as consumers worry about the impact of the higher taxation regime?
As for the day ahead, we have Eurozone CPI and unemployment data, while in the US, we have personal income, spending, PCE inflation data, initial jobless claims, and earnings from Amazon and Apple. In other markets, Bitcoin fell 0.8% to $72,236.35, Ether dropped 1.5% to $2,638.25, 10-year Treasuries open at 4.28%, spot gold fell 0.2% to $2,783.04 an ounce, and West Texas Intermediate crude rose 0.6% to $69.03 a barrel.
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