Dollar weakens after eighth week of gains; Yen jumps on BOJ Governor remarks

The Bank of Japan

Bank of Japan Governor Kazuo Ueda got the market excited on Monday morning, fueling hopes that Japan could soon move away from negative rates. Ueda told the Yomiuri newspaper that, by year's end, the Bank of Japan (BOJ) could have enough data to determine whether it could end negative rates.

USD/JPY

This pushed the JPY up against all major currencies, particularly the dollar. A welcome boost as the Japanese currency has recently come under immense pressure against the dollar. Last month, USD/JPY crossed the key level of $145 per dollar, and since then, traders have been on alert for any signs of intervention from Japan to shore up the currency.

The People's Bank of China

Meanwhile, China has also had to come out in defence of the yuan by delivering a strong verbal warning. The People's Bank of China said it will take action to correct one-sided moves in the market whenever it is needed and is confident in keeping the yuan stable.

The European Central Bank

The European Central Bank (ECB) is due to decide on its interest rate decision this Thursday. Having already raised its main refinancing rate from 0% last summer to 4.25% at its last meeting in July, has it beaten the biggest surge in inflation for a generation, or does it need to go just one more time to be sure? Doubts over whether the central bank will raise interest rates for the 10th consecutive time have intensified amid widespread signs of an impending economic downturn, including weaker business confidence and falling German industrial production.

But this would be outside the main remit of the ECB, which is to keep a lid on inflation. Derivatives markets are pricing only about a 35% chance of the ECB raising its rates on Thursday. The refinancing rate should therefore remain at 4.25%. No change either for the deposit facility rate or marginal lending rate, forecast respectively at 3.75% and 4.50%.

UK economy overview

In the UK, a few macroeconomic indicators are scheduled throughout the week. Starting on Tuesday, the unemployment rate is expected to rise to 4.3% in July from 4.2% the previous month. On Wednesday, July GDP is forecast to fall by 0.2% on the previous month, and industrial production is expected to decline by 0.6% in July month-over-month (MoM).

The US dollar

The USD starts out the week having hit new six-month highs on Friday. There's growing confidence about the US economy, which has been backed up by US Treasury Secretary Janet Yellen. Speaking at the G20 meeting in New Delhi over the weekend, she said she's increasingly confident about the US's economic performance. Yellen said that the US should be able to contain inflation without major damage to the job market, backing recent data that shows a steady slowdown in inflation and a fresh influx of job seekers.

US CPI

This week there's key inflation data before the Federal Reserve (Fed)'s decision on Wednesday. US consumer price index (CPI) growth is expected to accelerate to 3.6% in August year-on-year (YOY) after a 3.2% rise last month. an increase due to the recent rise in oil prices. Core CPI is forecast at 4.3% YoY, after 4.7% in July. On Thursday, retail sales are anticipated to increase by 0.2% in August on a monthly basis, and on Friday, industrial production is seen falling by 0.5% YoY.

The British homebuilder Vistry

British homebuilder Vistry announced this morning that it will merge its affordable housing 'Partnerships' business with its housebuilding operations. An announcement was made as the group posted an adjusted pre-tax profit of £174 million for the first half of its exercise, down 8.4% compared with 189.9 million pounds a year earlier.

The Board re-iterates guidance of in excess of £450 million in adjusted profit before tax for the finacial year 2023 (FY23). Vistry is aiming to return £1 billion to shareholders over the next three years from ordinary and special distributions, alongside the elimination of net debt, and intends to launch an initial share buyback programme of up to £55 million in November 2023.

Oracle

Oracle is scheduled to release fiscal first-quarter fiscal 2024 results after the market closes on Monday. Analysts are estimating earnings per share (EPS) at $1.14. on revenues of $12.45 billion, which would represent an increase of 8.8% on a year-over-year basis.

Investors will particularly focus on the group's digital transformation, along with the continuation of remote work and mainstream adoption of the hybrid/flexible work model, which are expected to drive demand for Oracle Cloud Infrastructure services. Investors also want to see how the acquisition of Cerner in 2022 has bolstered the company's position in the lucrative healthcare domain.