Foreign Exchange Market Outlook (USD, Euro)
2023-11-07
■USD >> USD/JPY is trading in the 149-yen range.
■Euro >> The euro may be looking for direction.
USD/JPY continued to fall last week. At the Bank of Japan’s monetary policy meeting on October 31, long- and short-term interest rate operations were revised, but this has been reported by the media. USD/JPY rebounded from the second half of the 148-yen range to the second half of the 151-yen range. Subsequently, Kanda's financial officer warned of the depreciation of the yen, pushing the yen higher again. On the same day, the Federal Open Market Committee decided to keep the policy interest rate unchanged at the November 1 meeting. There was no strong hint of additional interest rate hikes from the statement document and Fed Chairman Powell's press conference. USD/JPY was suppressed by poor U.S. employment data, and its gains narrowed to the first half of 149 yen.
That view was reinforced after October's U.S. employment statistics showed labor market tensions had eased and policy rates had peaked. The market has lowered expectations for a U.S. dollar rate hike to 5% in December and 11% in January 2024, which could lead to a depreciation of the U.S. dollar and an appreciation of the yen, especially given the narrowing of the Japan-U.S. interest rate differential. This week we will pay close attention to whether Bank of Japan President Ueda and Federal Reserve Chairman Powell provide new clues about policy guidance at the November 9 event, and we will also observe the October U.S. Consumer Price Index released on November 14. After USD/JPY hits a high of 151.74 yen on October 31, the market will usher in a rally and is expected to trade sideways within the 149-yen range.
The euro rebounded last week. The real GDP of the Eurozone in the third quarter (preliminary data) fell by 0.1% year-on-year, and the consumer price index (HICP, preliminary data) in October rose by 2.9% year-on-year, both lower than market expectations, putting pressure on the euro. However, in the first half of last week, the yen depreciated due to the outcome of the Bank of Japan's monetary policy decision meeting, and in the second half of the week, due to the impact of US economic indicators, the dollar depreciated, allowing the euro to rise. Against the U.S. dollar, EUR/USD rose from the $1.05 range to the $1.07 range. Against the yen, the exchange rate rose from the 157-yen range to the 160-yen range before crossing that range in the first half of last week.
Economic indicators in the eurozone are expected to remain weak, limiting the euro's upside. Market expectations are that the Sentix investor confidence index will drop to -22.2 in November and will continue to decline, and retail sales in September are expected to drop 0.2% from the previous month. On the other hand, with the inflation issue unresolved, over the weekend, many senior European Central Bank (ECB) officials expressed their negative attitude towards an early interest rate cut, so we will also pay attention to similar remarks this week. EUR/USD is expected to find direction around the $1.07 range, and EUR/JPY is expected to find direction around the 160-yen range.
■Euro >> The euro may be looking for direction.
USD/JPY continued to fall last week. At the Bank of Japan’s monetary policy meeting on October 31, long- and short-term interest rate operations were revised, but this has been reported by the media. USD/JPY rebounded from the second half of the 148-yen range to the second half of the 151-yen range. Subsequently, Kanda's financial officer warned of the depreciation of the yen, pushing the yen higher again. On the same day, the Federal Open Market Committee decided to keep the policy interest rate unchanged at the November 1 meeting. There was no strong hint of additional interest rate hikes from the statement document and Fed Chairman Powell's press conference. USD/JPY was suppressed by poor U.S. employment data, and its gains narrowed to the first half of 149 yen.
That view was reinforced after October's U.S. employment statistics showed labor market tensions had eased and policy rates had peaked. The market has lowered expectations for a U.S. dollar rate hike to 5% in December and 11% in January 2024, which could lead to a depreciation of the U.S. dollar and an appreciation of the yen, especially given the narrowing of the Japan-U.S. interest rate differential. This week we will pay close attention to whether Bank of Japan President Ueda and Federal Reserve Chairman Powell provide new clues about policy guidance at the November 9 event, and we will also observe the October U.S. Consumer Price Index released on November 14. After USD/JPY hits a high of 151.74 yen on October 31, the market will usher in a rally and is expected to trade sideways within the 149-yen range.
The euro rebounded last week. The real GDP of the Eurozone in the third quarter (preliminary data) fell by 0.1% year-on-year, and the consumer price index (HICP, preliminary data) in October rose by 2.9% year-on-year, both lower than market expectations, putting pressure on the euro. However, in the first half of last week, the yen depreciated due to the outcome of the Bank of Japan's monetary policy decision meeting, and in the second half of the week, due to the impact of US economic indicators, the dollar depreciated, allowing the euro to rise. Against the U.S. dollar, EUR/USD rose from the $1.05 range to the $1.07 range. Against the yen, the exchange rate rose from the 157-yen range to the 160-yen range before crossing that range in the first half of last week.
Economic indicators in the eurozone are expected to remain weak, limiting the euro's upside. Market expectations are that the Sentix investor confidence index will drop to -22.2 in November and will continue to decline, and retail sales in September are expected to drop 0.2% from the previous month. On the other hand, with the inflation issue unresolved, over the weekend, many senior European Central Bank (ECB) officials expressed their negative attitude towards an early interest rate cut, so we will also pay attention to similar remarks this week. EUR/USD is expected to find direction around the $1.07 range, and EUR/JPY is expected to find direction around the 160-yen range.