Headlines:
- Japan top currency diplomat says that they have intervened in the FX market
- Japan finance minister says decided to intervene after examining overall trend
- Historic moment for the yen but is it enough?
- USD/JPY tumbles as Japan intervenes to buy the yen for the first time since 1998
- SNB raises policy rate by 75 bps to 0.50%, as expected
- Swiss franc weakens as SNB puts an end to the negative interest rates era
- BOE raises bank rate by 50 bps to 2.25%, as expected
- Markets pare back BOE rate pricing in the aftermath of the policy decision
- BOJ's Kuroda: Will patiently continue powerful monetary easing
- BOJ's Kuroda: No need to change forward guidance at the moment
- ECB's Schnabel: We must further increase interest rates
Markets:
- JPY leads, CHF lags on the day
- European equities lower; S&P 500 futures down 0.2%
- US 10-year yields up 3.8 bps to 3.549%
- Gold down 0.2% to $1,670.49
- WTI crude up 1.2% to $83.92
- Bitcoin up 1.1% to $19,140
What a wild day this has turned out to be (and we're not done yet!) as the central bank bonanza this week was upstaged by Japan intervening to prop up the yen for the first time since June 1998.
The BOJ kept monetary policy unchanged and Kuroda delivered the usual snoozefest in his press conference before markets decided to push USD/JPY to fresh cycle highs above 145.00 going into European trading. The high touched 145.89 before it all came crashing down as Japan announced that they have intervened in the FX market to buy the yen.
USD/JPY quickly fell to 142.50 before extending that drop to a low of 140.66 in highly volatile trading. There have been big swings in between then and now with the pair holding lower by 1.5% currently at 141.90 at the time of writing.
The retreat in USD/JPY also sparked a decline in the dollar elsewhere with EUR/USD inching up towards 0.9900 before slipping back down to 0.9860 currently. GBP/USD was up to 1.1350-60 early on before seeing gains erased to 1.1280-90 levels now after the BOE raised the bank rate by 50 bps, as anticipated.
The Swiss franc was the other big mover today as it crumbled after the SNB decided to raise its policy rate by 75 bps - meeting expectations but market pricing had it for a 100 bps move. I want to say that the Swiss central bank is also trying to smooth out the franc appreciation and this was the best time to have done that.
EUR/CHF is up nearly 2% in a surge higher from 0.9470 to 0.9680 now with the high earlier touching 0.9715. USD/CHF is also up 1.6% to 0.9815 at the moment with the earlier high touching 0.9851 - testing key technical resistance as outlined here.
Elsewhere, equities were taken for a ride with early losses in US futures turning into gains before being erased again now as we look towards the open in Wall Street. European indices are down markedly as they are playing catch up to the post-FOMC declines in US stocks yesterday.
But for the time being, the FX market is stealing the spotlight after a historic day in which Japan decided to take action to defend the yen currency for the first time in over 24 years.
