A snippet from Mizuho analysts, looking across the decisions ahead this week from the big 3; the Federal Open Market Committee (FOMC), the European Central Bank, and then the Bank of Japan.
Mizuho say that while the actual decisions are (almost certainly) baked in:
- FOMC +25
- ECB +25
- BoJ hold
the "talk" from these G3 Banks will be far more influential for market direction.
- And the thing about talk having far more influence ... is that it sets the stage for more pronounced volatility; insofar that talk is open to significantly more variance in interpretation (especially between intend and effect) versus action that is arguably more objective.
Mizuho expects the USD:
- may come out with an advantage as the bet impact may be from “peak Fed” bets being forced to adjust for more hikes on the table; and possibly a fairly strong signal of “live” September
For the EUR:
- the ECB might have a higher hawkish bar to clear for EUR to continue with unabated rallies
- Although admittedly, President Lagarde’s ability to convey an unflinching commitment to tame inflation could have unintended consequences of boosting EUR
For the yen though:
- more likely than not to be on the back foot as higher global yields on both sides of the Atlantic from hawkish references by the Fed and ECB stands at stark contrast to a patient BoJ that is not convinced of, and this not responding to, demand-pull inflation risks.
The ECB and BoJ bosses
