- The EUR/JPY could be appreciated as the BOJ adopts caution on the exit of its ultra-flexible policy.
- The governor of the Boj, Ueda, stressed that future rates of rates will be based on data.
- The head of the ECB policy, Pierre Wunsch, said: “I don’t feel uncomfortable with the expectations of market interest rates.”
The EUR/JPY remains stable after the recent profits recorded in the previous session, quoting around 169.50 during the Asian hours of Thursday. The crossing of currencies could recover land as the Japanese Yen (JPY) in front of challenges due to the caution of the Bank of Japan (BOJ) about the exit of their ultra-flexible policy, which forces investors to delay their expectations of early rise in interest rates. The new member of the Bank of the Bank of Japan (BOJ), Kazuyuki Masu, stood out on Tuesday that the Central Bank should not hurry to raise interest rates given the various economic risks.
In addition, the governor of the Boj, Kazuo Ueda, said that any rates in the future will be based on data, including salary growth and expectations. Ueda mentioned that general inflation has remained above 2% for almost three years, and underlying inflation remains below the target.
The Japanese Yen fought since the US president, Donald Trump, said Tuesday that he is considering adding additional tariffs of 30% or 35% to Japan and not extending the self -imposed deadline on July 9 over reciprocal tariffs currently suspended. Trump expressed his doubts about reaching an agreement with Japan.
The operators are closely observing the European Central Bank forum (ECB) in search of signals on the policy perspective of the Central Bank for the rest of the year. The latest comments from several ECB officials highlighted the growing concern about the strength of the euro (EUR) and its possible discouraging effect on inflation.
The head of the ECB policy, Pierre Wunsch, said Wednesday: “I don’t feel uncomfortable with the expectations of market interest rates.” “There is an argument to provide a slightly favorable policy position,” Wunsch added. Meanwhile, the ECB member, Olli Rehn, said: “The ECB should be aware of the risk that inflation is persistently maintained below the 2%target.” Rehn said that “the European joint indebtedness to finance the defense could reinforce the role of the euro by creating a new safe asset.”
US interest rates – Frequently asked questions
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
