Here is what you need to know on Friday, September 23:
Markets seem to have cooled down early Friday following Thursday's wild fluctuations on Japan's intervention in the foreign exchange market, the Swiss National Bank (SNB) and the Bank of England's (BoE) rate hikes. The US Dollar Index moves up and down in a tight range above 111.00 and the US stock index futures trade flat in the early European morning. S&P Global will release the preliminary Manufacturing and Services PMI report for Germany, the eurozone, the UK and finally the US ahead of the weekend.
In a dramatic turn of events, Japan's top currency diplomat Masato Kanda announced on Monday that they have intervened in the fx market. In a press conference following that action, Japanese Finance Minister Shunichi Suzuki said that they were concerned about excessive fx moves but refrained from commenting on the size of the intervention. Meanwhile, Kanda added that further forex action can be taken any day, anywhere, including on holidays. Japanese markets are closed on Friday in observance of the Autumnal Equinox Day holiday. USD/JPY dropped to a two-week low of 140.35 on this development but managed to stage a rebound in the late American session. Nevertheless, the pair ended up losing 200 pips on Thursday before going into a consolidation phase slightly above 142.00 early Friday.
Following its September policy meeting, the SNB decided to hike its policy rate by 75 bps to 0.5%. Commenting on the policy outlook, Chairman Thomas Jordan noted that negative rates will remain an important instrument and be used if needed. Jordan also added that the SNB is ready to "intervene to prevent excessive weakening or strengthening of franc." The CHF suffered heavy losses against its major rivals and USD/CHF climbed to its highest level since early September at 0.9850 before retreating below 0.9800 later in the day. At the time of press, the pair was moving sideways at around 0.9780.
The BoE raised its policy rate by 50 bps to 2.25% as expected on Thursday. The initial market reaction caused the British pound to lose interest as futures markets were pricing in a strong chance of a 75 bps increase. Five MPC members voted in favour of the 50 bps hike while MPC members Haskel, Mann and Ramsden voted to raise rates to 2.5%; MPC's Dhingra voted for 2%." Regarding the fiscal measures introduced by British Prime Minister Liz Truss, the BoE argued in its policy statement that the energy price guarantee may reduce the risk of persistent domestic price and wage pressures but acknowledged that risk remains material. Although GBP/USD managed to hold above 1.1300 for the majority of the day, it came under heavy bearish in the American session and declined toward 1.1200. As of writing, the pair was trading little changed on the day slightly below 1.1250.
EUR/USD failed to reclaim 0.9900 and erased all of its earlier gains to close the day flat slightly below 0.9850 on Thursday. The pair stays relatively quiet above 0.9800 early Friday.
Gold managed to capture some of the outflows out of major currencies as investors looked for a safer alternative during Thursday's crazy action. Nevertheless, with the benchmark 10-year US Treasury bond yield gaining more than 5% and rising above 3.7%, XAU/USD struggled to preserve its bullish momentum. The pair was last seen moving up and down above $1,670.
Bitcoin snapped a two-day losing streak and gained 5% on Thursday before going into a consolidation phase at around $19,500 early Friday. Ethereum rose nearly 7% on Thursday and is already up over 1% so far on the day, trading above $1,300.
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