Market Watch: BOJ Disappoints

Financial and commodity markets analytics

The Bank of Japan has lowered its cap of 1.0% on the 10-year while raising its forecast for core CPI this fiscal year as well as next. Many were disappointed by this, as they expected a more aggressive move to end the extraordinary monetary policies. In disappointment, the yen was sold and the dollar is now back to the JPY150.75 area. The dollar is weaker against the majority of other G10 currencies. 
Gold has recovered from a dip under $1991 and is now knocking on $2000. 
WTI December is stabilizing following yesterday's almost 3.8% drop, the biggest since October 4.

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BOJ has now revised its core inflation rate (excluding fresh foods) to 2.8% from 2.5% in July. Core CPI was increased to 2.8% for the fiscal next year from 1.9%. For fiscal 2025 however, the CPI was raised to 1.7%, from 1.6%. 
Before the central bank meeting result, Japan had reported a 0.2% decline in September industrial production. 

Yesterday, the prospect of an increase by the Reserve Bank of Australia was a major factor in helping the Australian dollar reach a three-day peak near $0.6385. Since October 11, it hasn't closed above $0.6400. Yesterday's settlement was actually the highest since October 11.

The Eurozone released its first estimate of GDP for Q3 and its preliminary estimate of the October CPI. 
The headline inflation rate rose from 4.3% to 2.9% over the past year, down from September's reading of 4.3%. The base effect was a major factor. 
The GDP of the Eurozone contracted by 0.1% in Q3. After stagnating for Q4 22 as well as Q1 23, it showed a slight growth of 0.2% (revised from 0.1%) in Q2. The growth impulses are weak, and the outlook for the fourth quarter does not seem to be any better. 
In response to yesterday's drop in the US Dollar against all G10 currencies the euro rose to $1.0625 - a new four-day high. Today, it has increased to around $1.0645 and then spiked up to $1.0675 following the release of data. 

Yesterday, sterling fluctuated between the low and high of last Friday. It settled at $1.0675. Today, sterling has risen slightly to a five-day new high around $1.2195.

Markets are focused on the FOMC and tomorrow's Treasury announcement about the size of the quarterly refunding. The US takes center stage with the BOJ meeting over and the eurozone reports. 
The Q3 Employment Cost Index may be more important than the Conference Board's measure for consumer confidence or house prices. 

Canada releases its August GDP. As a result of the disappointing monthly GDP figures for June and July, the Canadian dollar fell. Yesterday, the US dollar had a positive day against the Canadian Dollar after hitting its highest level for the year just before the weekend.