By Areena FxFollowing the Bank of Japan’s decision to raise interest rates for the first time in 17 years, the yen has weakened, contrary to expectations. Concerns over a potential ‘one and done’ rate cut have led traders to revise their USDJPY forecasts downward, with some predicting levels as low as 145 within the next 12 months. Despite efforts by authorities to curb speculative movements, the yen remains under pressure, leading to a weaker Nikkei index.
Meanwhile, Federal Reserve policymakers have shown little concern regarding recent fluctuations in inflation. Although the US 2-year yield initially fell and the dollar weakened after last week’s meeting, robust economic data has bolstered the dollar index to its highest since February. This week, the US is expected to release its Q4 GDP update, with growth projected to exceed 3%, indicating a resilient economy amid potential monetary policy adjustments.
US equity markets continue to soar, with the S&P500 experiencing its best week of the year and on track for its most significant advance since 1970. The positive sentiment is attributed to anticipated rate cuts and increased adoption of artificial intelligence, both favorable for stock valuations.
In Europe, despite concerns over European luxury stocks and ECB Chief Lagarde’s caution regarding rate cuts beyond June, the Stoxx 600 reached record highs. The Swiss National Bank’s surprise rate cut led to a weakening franc and extended gains in Swiss equities. However, Swiss stocks remain below their pre-pandemic peak, with the franc expected to depreciate against major currencies gradually.
This week, Eurozone countries will release inflation figures, while the EURUSD pair continues to face challenges despite dovish Fed policies and hawkish ECB sentiments. On the corporate front, notable IPOs include Reddit and Galderma, with Trump’s Truth Social poised to go public soon, generating speculation and volatility in the market.
Financial markets remain dynamic, influenced by central bank policies, economic data releases, and corporate activities.