Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
BoJ “hold” boosts greenback
The US dollar was mostly stronger and Asian FX fell on Friday after the Bank of Japan maintained policy settings and declined to tighten further.
However, the BoJ did say it would detail a plan to reduce its balance sheet at its July meeting.
The falling JPY has been a major driver of weakness in Asian FX as it caused the USD to gain in major markets like the USD/CNH and USD/SGD.
In other markets, the stronger US dollar after the BoJ decision saw the AUD/USD fall 0.3% and NZD/USD lose 0.4%.
US equities at highs
US equity markets were flat to higher on Friday with the Nasdaq notably hitting new all-time highs on Friday and up 16% since 22 April.
Financial markets have been relatively resilient despite falling expectations for Federal Reserve rate cuts – the markets expected six rate cuts at the start of the year. The market now sees two cuts as most likely (source: CME Fedwatch).
However, key risks remain. First, a US election outcome that hinders US involvement with the rest of the world and second, persistently high core inflation that would force the Fed to stay on hold until after the November elections.
RBA, BoE in focus
Looking forward, FX markets will be driven by central bank decisions and key economic releases this week, with policy announcements due from the Reserve Bank of Australia, Bank of England and Norges Bank.
Today, Chinese industrial production, retail sales and fixed asset investment are likely to be the major events.
The US calendar is packed with important data, including retail sales, industrial production, and housing starts, which could influence Federal Reserve policy expectations despite the Juneteenth holiday on Wednesday closing most markets.
In Europe, final HICP inflation figures and consumer confidence data will be watched for signs of economic resilience. The UK also has significant releases with CPI and retail sales that may impact Bank of England policy views.
Aussie, kiwi back away from highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 17 – 22 June
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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