Dollar strength and probable yen intervention

The JOLTS survey showed the strength of the labor market. The number of vacancies increased to over 9,6 million, which exceeded expectations. The dollar strengthened and yields on US debt rose again. Wall Street and European indices ended the day with significant losses, the Nasdaq Composite fell by 1,9%. and Dax decreased by 1,1%.

After the increase of the USD/JPY currency pair there was probably an intervention, which resulted in a dynamic drop in the rate to 147,30. Japanese officials, however, refused to confirm any interference on FX market.

The market picture is a strong dollar

The dollar is on an upward path and subsequent data only help it continue its appreciation. On Monday, the USD gained strength positive ISM result for industry. Yesterday, the JOLTS survey surprise supported the currency again. Additionally, we learned some comments from the Fed. Raphael Bostic repeated the famous sentiment that US interest rates should remain high for a long time. Cleveland Fed President Loretta Mester even went a step further and emphasized the possibility of another rate hike this year. Meaning that EUR / USD exchange rate it still remains below the level of 1,05 and remains below it for longer and longer.

Today we will get to know another data package. The most important one seems to be the ISM report for services, but I assume so investors will not ignore the ADP reading, because in 2 days we will receive government data on the situation on the labor market and the market will certainly want to position itself accordingly.

The current market picture is a strong dollar, rising US debt yields and falling indices, which fear that restrictive monetary policy will remain for longer.

Intervention on POWs?adp

After a few weeks of slowly getting closer USD/JPY currency pair to the level of 150,00, yesterday this level was finally reached. A moment later we saw a sharp decline towards 147,00. However, there was no official announcement about intervention from the Ministry of Finance or the Bank of Japan. This morning, after recovering from these declines, the currency pair is falling again. Of course, we can assume that some investors are simply afraid of intervention got rid of long positions yesterday on this currency pair because she believed that history might repeat itself.

Ultimately, however, interventions do little to change the fundamental situation. As long as the U.S. economy appears to be very solid (which provides an argument for the Fed to keep rates high), a BoJ does not seek to exit ultra-expansionary monetary policy, they exist strong arguments for the USDJPY uptrend.

The Monetary Policy Council will make another decision on monetary policy today. Let us recall that in September the cost of money in Poland was reduced by as much as 75 basis points, which led to an avalanche sale of the zloty. The Bloomberg and PAP consensus assumes a decline this time by only 25 bp. The lack of predictability regarding the Monetary Policy Council's decisions means that there is a high risk that the zloty will come under pressure again today and depreciate. Another stronger move cannot be ruled out.

Source: Łukasz Zembik, OANDA TMS Brokers