At the beginning of the year, there were expectations for a Fed rate cut in March. Instead, the Bank of Japan (BoJ) was surprised by the rate increase from -0.10% to 0% and the significant policy changes. Despite this hawkish shift, the Japanese yen did not rally as anticipated. The USDJPY and EURJPY pairs rose, while the Japanese 10-year yield fell by almost 3.5%.

The BoJ’s actions suggest a one-time move rather than a sustained policy shift. If Governor Ueda does not indicate further rate hikes, it’s unlikely that yen bulls will return. The decision was expected to strengthen the yen, but it didn’t happen. It’swhat could make betting on the yen profitable this year?

Meanwhile, the Reserve Bank of Australia (RBA) kept rates unchanged, sharply declining the AUDUSD pair. The dollar index strengthened, propelled by hawkish Federal Reserve (Fed) expectations ahead of the Fed’s meeting. The Fed is not expected to change rates, but market attention is on the dot plot, which may indicate fewer rate cuts than previously anticipated.

Amid rising yields and a strong dollar, the S&P500 surged, mainly driven by technology stocks. Tesla announced a price hike for its Model Y, while Apple and Google made headlines regarding AI integration. However, Nvidia’s new chip announcement didn’t lift its stock, possibly indicating market exhaustion.

In energy markets, US crude surpassed $82pb due to ongoing tensions between Ukraine and Russia. Geopolitical concerns and expectations of supply deficits supported prices, with a potential rise to $85pb. However, a hawkish shift from the Fed could dampen global demand expectations and limit further upside.

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