The following important indicator for the perspective of the US monetary policy will be the monthly data on employment, expected on Friday. The market has fully taken into account the possibility of a rate cut by the Federal Reserve in July, according to LSEG data. Analysts predict a reduction in the rate by 46.3 basis points at the December meeting. Meanwhile, market expectations regarding a rapid rate cut by the Bank of England stand at 92%.
Two rate cuts by the Federal Reserve by the end of the year are anticipated, but with a decreasing likelihood that the tariffs will exert pressure on inflation, there appears to be greater flexibility for the Federal Reserve. As for the Bank of Japan, the market estimates the likelihood of an increase in rates at 94.8% by September.
Board member of the Bank of Japan Naoki Tamura stated on Thursday that the central bank should raise the rate to a minimum of 1% by the end of the fiscal year 2025, given the increasing risks of price rises. This data reflects the second month of growth in real wages.
The US dollar dropped to an eight-week low against the yen and was held around its one-month low against the pound on Thursday as investor nervousness about rising inflation globally subsided. The current situation also supports expectations for further increases in rates at the Bank of Japan after the representative of the central bank called for their continuation in the face of strong previous wage growth data.
The pound remains stable, even with broadly expected cuts in the Bank of England's rates later in the day. The dollar dropped by 0.5% to 151.81 yen, which is the lowest since December 12, after a 1.1% drop from the average. The pound remained at $1.2509, after rising to $1.2550 in the previous session for the first time since January 7. The euro was stable at $1.0401 after a 0.2% increase in average. The dollar index – which measures the value of the US dollar against the euro, pound, yen, and three other major currencies – stood at 107.57, slightly above its overnight low of 107.29. The updated yuan strengthened against the dollar to 7.2775.
The Canadian dollar remained stable at C$1.4321 against its American counterpart, after climbing to a maximum since December 17 to a level of C$1.4270 during the night session. 'It seems that the market has started distancing itself from tariff risks against Mexico and Canada as a whole, considering the tariffs on China as a usual business,' noted James Kniveton, senior currency operations specialist at Convera. The Mexican peso remained stable at 20.5789 per dollar.
