The Bank of Japan (BoJ) published the Summary of Opinions from the September monetary policy meeting, with the key findings noted below.
Softer US inflation pulled October Fed hike odds down to near 35%, and USD/JPY fell below 156.50 on the release. It finished back just under 157.50, its fourth straight close on the 157.00 handle. The Yen got the US number it needed and USD/JPY still closed a touch above where it opened.
The Bank of Japan’s (BoJ) Tankan survey of business sentiment improved slightly but missed market forecasts in the manufacturing sector. Japan’s Tankan Large Manufacturing Index rose to 24 in the third quarter (Q3) from 22 in the previous reading, weaker than the market expectation of 25.
The Kiwi has followed US bond yields all month, and better numbers from New Zealand's biggest export market didn't change that on Wednesday. China's official services index came in at 50.2 against a 49.3 forecast, and the private services and factory gauges beat as well.
Germany, France, Italy and Spain all reported September inflation above forecast, which should have lifted bets on another European Central Bank (ECB) hike and the Euro with them. EUR/USD closed lower instead, its second straight close under 1.1350.
Gold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday.
Markets put a better than 80% chance on the Bank of England (BoE) raising the UK's Bank Rate from 3.75% on November 5, and GBP/USD still couldn't close above 1.3300.
The 10-year Treasury yield rose to near 5.30% on Wednesday, its highest since 2007, on the same day US inflation came in under forecast. The Dow Jones Industrial Average rallied on the inflation release, faded for the rest of the session and closed on its low, just under 51,000.
The Aussie Dollar posted losses of 0.57% against the US Dollar on Wednesday, even though US data trimmed hawkish bets on the Federal Reserve, while the dovish tilt of RBA’s Governor Michele Bullock weighed on the antipodean.
Minneapolis Fed President Neel Kashkari said, “Inflation is still too high, about 3%, new data doesn't alter outlook,” he said at a Q&A at the Council on Foreign Relations.
The USD/JPY registers modest gains of 0.08% on Wednesday after US inflation data trimmed market bets on a Federal Reserve rate hike at the October 28 meeting. At the time of writing, the pair trades at 157.42.
Federal Reserve (Fed) Governor Lisa Cook crossed the wires on Wednesday and said she is committed to returning inflation to the Fed’s 2% goal while preserving the strength of the labor market.
The Mexican Peso (MXN) prolongs its agony, extending losses by over 0.11% against the Greenback for the third straight day on Wednesday, while USD/MXN continues to trade above the psychological level of 18.00 as the carry trade loses its appeal.
The US Dollar (USD) has traded with marginal gains, coming under pressure following daily tops near 101.50 as investors evaluated softer-than-expected PCE data in August and trimmed some bets on extra tightening by the Federal Reserve (Fed) in the following months.
EUR/USD remains on the defensive on Wednesday as a broadly stronger US Dollar (USD) weighs on the pair, leaving the Euro on track for a loss of more than 2% in September. At the time of writing, EUR/USD trades around 1.1337, close to Tuesday’s low of 1.1312, its weakest level since May 2025.
Gold prices (XAU/USD) retreated on Wednesday, down 0.6%, after US inflation data came in above the Federal Reserve’s (Fed) 2% goal but below estimates, prompting investors to price in a less hawkish central bank than expected. The XAU/USD trades at $4,155 at the time of writing.
West Texas Intermediate (WTI) Oil rebounds on Wednesday and remains on track for a monthly gain of around 5.5%. The lack of progress in US-Iran negotiations to reopen the Strait of Hormuz keeps geopolitical risks elevated, even as Middle East supply conditions improve.
European Central Bank (ECB) President Christine Lagarde said that France’s debt situation is “serious at 120% of GDP and without a path to lowering it.”
European Central Bank (ECB) Governing Council member Isabel Schnabel said Wednesday that high costs are passed through to consumers more quickly when the economy is resilient.
AUD/USD declines 0.41% on Wednesday and trades around 0.6960 at the time of writing, having fully erased its initial rebound following the release of softer-than-expected United States (US) inflation data.
Silver (XAG/USD) trades under pressure on Wednesday even as traders reduce bets that the Federal Reserve (Fed) will raise interest rates again in October following softer-than-expected US PCE inflation data.
The Pound Sterling (GBP) posts solid gains versus the US Dollar (USD) on Wednesday, edging up 0.42% as the latest US inflation figures were below estimates, reaffirming New York Federal Reserve (Fed) President John Williams' comments that the Fed is in no rush to tighten monetary policy.
Societe Generale analysts note China has unveiled targeted support measures, including a 25bp cut to the PBoC’s PSL rate and expanded relending quotas for innovation, technology, agriculture and small businesses.
TD Securities' Macro Research team expects the European Central Bank (ECB) to continue a measured tightening cycle, delivering a final 25bp hike in December and taking the deposit rate to 2.75%, which they see as mildly restrictive.
USD/JPY falls 0.30% on Wednesday and trades around 156.80 at the time of writing, as the US Dollar (USD) comes under selling pressure following softer-than-expected United States (US) inflation data.
EUR/USD holds modest gains on Wednesday as traders assess the latest economic data from both sides of the Atlantic. At the time of writing, the pair trades around 1.1363, up 0.20% on the day, after touching 1.1312 on Tuesday, its lowest level since May 2025.
Deutsche Bank’s Early Morning Reid notes that China’s latest PMI data show a broad-based pickup in activity. The private-sector RatingDog Manufacturing PMI and official manufacturing PMI both strengthened, with the latter returning to expansion. Services and non-manufacturing indices also improved, lifting the composite PMI above 50 and signaling a more supportive backdrop for Chinese equities and growth.
USD/CAD declines 0.08% on Wednesday and trades around 1.4180 at the time of writing, after touching a daily low of 1.4155 in the wake of US inflation data. The pair recovered some losses as investors reassessed the timing of a potential further tightening by the Federal Reserve (Fed).
RaboResearch Global Economics & Markets’ FX Strategy team assesses EUR/GBP in light of UK politics, growth and monetary policy. They note the Pound’s recent support from stronger UK GDP, but expect GBP bulls to stay cautious ahead of the October 28 budget.
Gold (XAU/USD) reverses its earlier gains on Wednesday after briefly climbing above $4,200 in reaction to softer-than-expected US Personal Consumption Expenditures (PCE) inflation data. The initial move fades as the US Dollar (USD) trims its losses and US Treasury yields resume their advance.