Macro Calendar – Dovish BoJ Pivot and Key Data from Europe and the US

Today's session on financial markets is marked by key monetary policy decisions from Asia. The Bank of Japan (BoJ) decided to raise interest rates by 25 basis points to just below 1.25%, triggering strong volatility in yen pairs. The USDJPY exchange rate rose above the 157 level, reaching its highest peaks since early September.

The BoJ pointed to rising inflation expectations and the pass-through of higher wage costs to retail prices. Meanwhile, Japan's National Core CPI settled at 1.7% y/y, slightly below the consensus (1.8%). A key factor behind the yen's weakness was the lack of a strong hawkish message and two members voting to maintain interest rates.
New Zealand released better-than-expected trade balance data (a smaller trade deficit) and a higher food price index reading. Later in the day, investor attention will shift to UK retail sales data, US industrial production, and central bank speeches, including ECB President Christine Lagarde. The geopolitical situation remains tense following reports of Russian attacks on logistical infrastructure near Odessa.

Key Publications from the Asian Session 

• New Zealand - Food Price Index (FPI) m/m came in at 0.3% (previously: 0.1%).
• New Zealand - Trade balance showed a deficit of -1349M against forecasts of -1775M (previously: -2118M).
• Japan - National Core CPI y/y slowed to 1.7% with a consensus of 1.8% (previously: 1.8%).
• Japan - Bank of Japan raised its main interest rate to 1.25% (previously: 1.00%), pointing to the risk of inflation lingering above the 2% target.

Macroeconomic Calendar (CET)

• 01:30 CET Australia - RBA Governor Bullock speech.
• 04:54 CET Japan - BOJ Monetary Policy Statement.
• 08:00 CET Germany - Producer Price Index (PPI) m/m. Consensus: 0.6%. Previous reading: 1.1%.
• 08:00 CET United Kingdom - Retail Sales m/m. Consensus: -0.2%. Previous reading: -0.5%.
• 10:00 CET Eurozone - Current Account. Consensus: 30.7B. Previous reading: 35.1B.
• 12:30 CET Eurozone - ECB President Lagarde speech.
• 15:15 CET USA - Capacity Utilization. Consensus: 76.4%. Previous reading: 76.3%.
• 15:15 CET USA - Industrial Production m/m. Consensus: 0.3%. Previous reading: 0.2%.
• 15:30 CET USA - FOMC Member Bowman speech.
• 16:00 CET USA - Conference Board Leading Index m/m. Consensus: 0.1%. Previous reading: 0.2%.
• 17:45 CET USA - FOMC Member Schmid speech.
• All day CET Eurozone - ECOFIN meeting.
• All day CET Eurozone - Eurogroup meeting.
• All day CET China - Foreign Direct Investment YTD y/y. Previous reading: -6.2%.

Markets to Watch

• USDJPY - The currency pair is showing strong growth, reaching its highest level since early September following the BoJ's decision to raise interest rates by 25 basis points. The market is reacting dynamically to the central bank's message and the upcoming press conference.
• GBPUSD - The British pound will be under strong influence from the release of August retail sales data. A reading better than expectations could support the pound and prompt the Bank of England to take a more cautious approach to monetary policy easing.
• EURUSD - The main currency pair may exhibit increased volatility due to the scheduled speech by ECB President Christine Lagarde and ongoing Eurogroup and ECOFIN meetings, which may bring comments on the economic condition of the eurozone.