Jen stronger after Ueda's words. The euro is waiting for the ECB's decision.

Currently, in the currency market, apart from the weakness of the Polish zloty, there is talk of a temporary appreciation of the Japanese yen, which gained after the statement of the president of the Bank of Japan. The USD/JPY pair "opened" the week with a downward gap and throughout this morning it has been gradually falling to lower levels, around 146,00.

The Bank of Japan would like a stronger currency

Moments after USD/JPY quotes tested this year's highs at 147,80, the market received information about the interview of the Governor of the Bank of Japan, in which he said that the institution would probably have enough information by the end of the year to be able to assess whether wages will continue to grow, thus creating conditions for adjusting monetary support. These comments were enough to make it happen the yen appreciated, although looking at the chart of the aforementioned currency pair, there was no breakthrough movement. Ueda stressed in a press interview that it is desirable for the yen to move in line with economic conditions. This means that the BoJ would like a stronger currency.

In the medium term, the JPY situation should nevertheless improve, because globally We are approaching the end of the interest rate increase cycle (USA, euro zone), and this will support the valuation of the Japanese currency.

Of course, we cannot rule out the scenario that at the end of the year, the Ueda will relatively easily find new reasons why a less expansionary monetary policy stance will not be sufficiently justified.

USD/JPY pair still is moving in a medium-term ascending channel. A new impetus began earlier this year. In March and July, a significant price correction was visible, but the last upward movement, which has been ongoing since mid-July, brought the quotations close to the level of 148 and thus the distance to the peak from last year (around 152,00) has definitely shrunk.

The market consensus indicates a pause

This week the market will focus on US inflation data and decisions EBC. The recent USD appreciation has been driven solid economic data from the US, which prompted market participants to postpone the expected interest rate cuts by the Fed to a later date. The first cuts are estimated to take place around the middle of next year. However, optimism regarding the data may be exaggerated and the high cost of money may have an increasingly greater impact on the economic situation in the fall, then the last strength of the dollar may quickly evaporate.

According to forecasts US core inflation is expected to decline year-on-year, although the basic indicator may be increased due to higher gasoline prices. In turn, retail sales are expected to remain solid (Thursday).

We are currently in a "black out" period, which means that the market will not receive any statements from Fed representatives regarding the future of monetary policy. We will therefore receive the Federal Reserve's assessment in the form of new projections during the rate decision, which is scheduled for next week.

The ECB will make a decision on Thursday. Macro data give room for both a break and further monetary tightening. Perhaps the bank will want to "buy" some time to better assess the current impact of increases of a total of 425 basis points. On the other hand, the minutes of the last meeting as well as the latest statements from the institutions suggest that the ECB still has it greater tolerance for negative surprises regarding economic growth than to unexpected changes in inflation. The market consensus indicates a pause and the market valuation gives less than 35 percent. chances of moving up.

Source: OANDA TMS Brokers