Forex News
The United Kingdom (UK) headline Consumer Price Index (CPI) rose 2.6% over the year in June, compared to a rise of 2.8% in May, the data released by the Office for National Statistics (ONS) showed on Wednesday.
Markets predicted a 2.7% growth in the reported period. The UK inflation reading was well above the Bank of England’s (BoE) 2% inflation target.
The core CPI (excluding volatile food and energy items) climbed 2.6% year-over-year (YoY) in the same period, compared to May’s 2.6% print and came in hotter than the forecast of 2.5%.
Meanwhile, the monthly UK CPI arrived at 0.1% in June versus a rise of 0.2% reported in May, in line with the market consensus of 0.1%.
GBP/USD reaction to the UK CPI inflation data
The British Pound (GBP) edges slightly lower in an immediate reaction to the UK inflation report. At the time of writing, the GBP/USD pair is trading 0.03% higher on the day to trade at 1.3380.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | 0.49% | 0.46% | 0.61% | -0.46% | 0.17% | 0.49% | |
| EUR | -0.15% | 0.34% | 0.26% | 0.45% | -0.61% | 0.01% | 0.33% | |
| GBP | -0.49% | -0.34% | -0.11% | 0.13% | -0.94% | -0.32% | 0.04% | |
| JPY | -0.46% | -0.26% | 0.11% | 0.23% | -0.87% | -0.34% | 0.14% | |
| CAD | -0.61% | -0.45% | -0.13% | -0.23% | -1.02% | -0.57% | -0.07% | |
| AUD | 0.46% | 0.61% | 0.94% | 0.87% | 1.02% | 0.63% | 0.97% | |
| NZD | -0.17% | -0.01% | 0.32% | 0.34% | 0.57% | -0.63% | 0.36% | |
| CHF | -0.49% | -0.33% | -0.04% | -0.14% | 0.07% | -0.97% | -0.36% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
This section below was published at 05:25 GMT as a preview of the UK Consumer Price Index (CPI) inflation data.
- The UK’s ONR Office publishes the June CPI data on Wednesday.
- The UK headline CPI is expected to ease toward 2.7% from a year earlier.
- Core inflation is also seen easing toward 2.5% over the last 12 months.
The UK Office for National Statistics (ONS) will release the June Consumer Price Index (CPI) figures on Wednesday at 06:00 GMT, a print that will matter for markets. Consensus expectations point to inflation pressures still above the Bank of England’s (BoE) target, although losing further momentum.
UK consumer inflation remains one of the most important inputs for the BoE and typically carries real weight for the British Pound (GBP). Following the latest cautious hold by the BoE on June 18, investors now favour a steady hand by the ‘Old Lady’ at its meeting on July 30.
What to expect from the next UK inflation report?
Headline UK CPI is expected to clock 2.7% in the year to June, a tad lower than the May reading. On a monthly basis, inflation is seen gaining 0.1%, adding to the 0.2% increase recorded the previous month.
Core inflation, which strips out the more volatile food and energy components and is therefore more closely watched by the BoE, is forecast at 2.5% on an annual basis, down a tenth of percent from May.
How will the UK CPI data affect GBP/USD?
The BoE met expectations and kept the bank rate unchanged at 3.75% on June 18. However, the 7–2 vote split carried a slightly more hawkish tone, with Megan Greene joining Huw Pill in supporting a 25-basis-point increase. But the larger message is patience, with policy still firmly in wait-and-see mode and market pricing that reflects that stance.
In his latest comments last week, Governor Andrew Bailey said the renewed hostilities in the Gulf highlighted the instability facing the global economy. Turning to the UK, he argued that the country was supported by both its fiscal framework and monetary policy, while stressing that the central challenge remained economic growth.
Bailey added that the UK’s core banking system was resilient and that debt levels were not overstretched. However, he warned that sustainable economic growth would not be possible without financial stability.
Implied rates currently suggest nearly 43 basis points of tightening by year-end, while consensus sees the central bank keeping its policy rate unchanged at its next gathering on July 30.
Back to technicals, Senior Analyst at FXStreet, Pablo Piovano, notes that the recent multi-week recovery in GBP/USD appears to have encountered some initial hurdle in the 1.3550-1.3560 band near the July tops. “In case bulls regain the upper hand, the next barrier emerges at the May top at 1.3653 (May 11), followed by the YTD ceiling at 1.3868 (January 27)," he adds.
On the downside, Piovano sees initial contention at current yearly lows near 1.3140 (June 24). “Further weakness from here could expose a move toward the November 2025 base at 1.3010 (November 5),” Piovano adds.
Piovano also points out that momentum indicators remain somewhat bullish for now as the Relative Strength Index (RSI) hovers just below 54, while the Average Directional Index (ADX) near 18 suggests the current trend lacks muscle.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Jun 17, 2026 06:00
Frequency: Monthly
Actual: 2.8%
Consensus: -
Previous: 2.8%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
ING’s commodities team notes Gold and Silver have extended gains on dip-buying and geopolitical concerns in the Middle East. They highlight Gold trading above $4,000/oz and Silver near $60/oz, supported by safe-haven flows and stronger industrial metals sentiment. ING expects Gold to stay sensitive to energy markets and US monetary policy, with Silver potentially outperforming if industrial strength persists.
Precious metals lifted by dip-buying
"Gold and silver extended gains, supported by bargain hunting after recent weakness and investors continuing to assess geopolitical risks in the Middle East. The move came despite lingering concerns that higher energy prices could add to inflationary pressures, complicating the Federal Reserve's path towards interest rate cuts."
"Gold climbed back above the $4,000/oz level, while silver outperformed, trading close to $60/oz. Silver’s performance reflects not only its safe-haven appeal but also support from improving sentiment across the industrial metals complex, particularly copper."
"The rebound appears driven more by fresh buying interest following a period of consolidation rather than a material shift in the geopolitical or macroeconomic backdrop. While tensions in the Middle East remain supportive for precious metals, markets are weighing softer US economic data against the inflationary risks from higher energy costs."
"Gold is likely to remain sensitive to developments in energy markets and expectations for US monetary policy. Silver could continue to outperform if strength in industrial metals persists alongside safe-haven demand."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- GBP/USD languishes below 1.3400 following soft UK inflation figures.
- The Pound has lost 1.20% so far this week amid growing doubts about PM Burnham's spending plans.
- The US Dollar remains bid, buoyed by Middle East tensions and higher US yields.
The British Pound (GBP) consolidates losses against the US Dollar (USD) on Wednesday, as a string of UK inflation figures provided some leeway for the Bank of England to maintain its “wait-and-see” stance through the coming months. The GBP/USD pair remains pinned near weekly lows, below 1.3400 following a nearly 1.2% decline in the last four days.
Data released by the UK National Statistics Office on Wednesday revealed that the Consumer Price Index (CPI) moderated to a 2.6% year-over-year (Y-o-Y) growth in June, from 2.8% in May, below the 2.7% forecasted by market analysts. The Core CPI, however, remained steady at 2.6% against expectations of a 2.5% reading.
Beyond that, the Input Producer Price Index (PPI) contracted 2% on the month, its sharpest decline in more than six years, while the Output PPI remained flat, undershooting expectations of a 0.4% advance. Year on year, input PPI eased to 7.3% from 9.3% while the Output PPI slowed down to 3.5% in June from 3.7% in May.
In the US, the calendar has been thin this week, but the US Dollar maintains a bid tone, buoyed by market concerns about the war in the Middle East and higher US Treasury yields. The US military pounded targets in Iran for the 11th consecutive day on Wednesday, and US President Donald Trump threatened to attack nuclear facilities, which, according to Tehran, would expand the war in the region.
UK Pound slides amid PM Burnham’s early fiscal signals
Rabobank’s FX team notes that “UK markets have now had a few hours to react to PM Burnham’s new cabinet, many of whom have been involved in UK politics for years,” and the initial response has been cautious. They highlight that “10-year gilt yields are currently above the 5% level, which is a sign of some anxiety,” while “the Pound is the worst performing G10 currency on a 1-day view,” underscoring investor unease around the new administration’s fiscal direction.
In the near term, Rabobank points out that “Burnham has promised measures to ease cost-of-living pressures,” with the policy push already underway. “He kicked this off this morning with the news that VAT on household electricity bills will be cut from October,” the bank observes, adding that “the market is now bracing itself for a list of further announcements” as investors assess how these initiatives will be funded and what they might mean for UK assets.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Jul 22, 2026 06:00
Frequency: Monthly
Actual: 2.6%
Consensus: 2.7%
Previous: 2.8%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
Economic Indicator
Consumer Price Index (MoM)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is also the inflation measure used in the government’s target. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Jul 22, 2026 06:00
Frequency: Monthly
Actual: 0.1%
Consensus: 0.1%
Previous: 0.2%
Source: Office for National Statistics
- The British Pound rebounds against the Japanese Yen from 218.20 after the UK CPI data release.
- The UK headline inflation cooled down at a faster-than-expected pace, with the core figure remaining steady, both at 2.6% YoY.
- Sheer weakness in the Japanese Yen has heightened hopes of Japan’s intervention.
The British Pound (GBP) witnesses slight buying interest against its major currency peers after the release of the United Kingdom (UK) Consumer Price Index (CPI) data for June. Against the Japanese Yen (JPY), the British currency rebounds strongly from the intraday low of 218.20.
The Office for National Statistics (ONS) has reported a slower-than-expected headline CPI growth. The headline inflation arrives at 2.6% Year-on-Year (YoY), lower than the estimates of 2.7% and the previous reading of 2.8%. On a monthly basis, the headline inflation rises at a moderate pace of 0.1%, as expected, against the previous reading of 0.2%.
However, the core CPI – which excludes volatile components such as food, energy, alcohol, and tobacco – grew steadily by 2.6% YoY, while it was expected to cool down to 2.5%.
Inflation in the service sector, which is closely tracked by Bank of England (BoE) officials, cooled down to 3.6% from 3.7% in May.
Slowing UK headline and services inflation growth is expected to ease fears of interest rate hikes by the BoE in the near-term.
Meanwhile, investors brace for more volatility in the British currency this week as the Retail Sales data for June and the preliminary S&P Global PMI data for July are lined up for release on Friday.
On the Tokyo front, investors expect Japan’s intervention in the forex market, following the decline in the Japanese Yen towards multi-decade lows against its major peers.
Earlier in the day, Japan’s Finance Minister (FM) Satsuki Katayama said that the authorities will take necessary steps on the foreign exchange if necessary. However, she declined to comment on specific forex levels.
Economic Indicator
Core Consumer Price Index (YoY)
The United Kingdom (UK) Core Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. The YoY reading compares prices in the reference month to a year earlier. Core CPI excludes the volatile components of food, energy, alcohol and tobacco. The Core CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Jul 22, 2026 06:00
Frequency: Monthly
Actual: 2.6%
Consensus: 2.5%
Previous: 2.6%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
- Gold attracts strong follow-through buying amid hopes for US-Iran diplomacy.
- Rallying oil prices fuel inflation concerns and bolster bets for a Fed rate hike.
- Escalating tensions in the Middle East favor USD bulls, capping the bullion.
Gold (XAU/USD) maintains its bid tone heading into the European session and currently trades just below a two-week high, set earlier this Wednesday. The US Dollar (USD) drifts lower following a four-day uptrend amid hopes that US-Iran diplomacy could ease energy prices and temper hawkish US Federal Reserve (Fed) expectations, underpinning the commodity. In fact, top negotiators for Iran and the US signaled that they have not walked away from talks. US Secretary of State Marco Rubio said on Sunday that the US was still open to holding talks with Iran, while Iran's Interior Minister Eskandar Momeni asked Pakistan to continue its efforts. Moreover, reports suggest that mediators are working to bring the US and Iran back to the negotiating table.
Meanwhile, the US military said it completed the 11th night of strikes on Iran early Wednesday, targeting aircraft hangars and drone storage sites. Adding to this, President Donald Trump warned that the US strikes would be intensifying and hit any site where Iran attempts to rebuild its nuclear program. Iran, on the other hand, continued attacks across the Gulf, targeting US military assets in Bahrain, Kuwait and Jordan. Adding to this, Iran said that its forces struck two oil tankers as they attempted to transit through the Strait of Hormuz. Furthermore, Yemen's Iran-aligned Houthis opened a new front in the war and declared a naval blockade against Saudi Arabia.
The latest developments raise the risk of a broader regional conflict and could compound the shortfall in global energy markets amid the closure of the Strait of Hormuz. This, in turn, lifts crude oil prices to a fresh high since June 12 and fuels worries about energy-driven inflation, which could force the US central bank to stick to its hawkish stance. The CME Group's FedWatch Tool indicates that traders are currently pricing in around an 88% chance that the Fed will raise borrowing costs at least once by the end of this year. The outlook, in turn, favors US Dollar (USD) bulls and warrants some caution before positioning for any further appreciating move for the non-yielding Gold.
Gold recovery seen constrained as Fed and real yields remain in focus
Analysts at OCBC suggest that, in the current environment, gold is likely to see “two-way” trading in the near term, with any rebound facing clear headwinds. They argue that “a more sustained recovery likely requires oil prices to back off, some easing in real yields and Fed tightening expectations,” and caution that “until then, upside may remain capped.”
XAU/USD 4-hour chart
Gold looks to build on strength beyond 200-SMA on H4
From a technical perspective, an intraday breakout through the 38.2% Fibonacci retracement level of the downfall since mid-June and acceptance above the $4,100 mark favor XAU/USD bulls. Furthermore, momentum indicators remain strong as the Relative Strength Index (14) hovers near overbought territory around 69.9, and the Moving Average Convergence Divergence (MACD) stays positive with the line well above zero. This, in turn, hints that upside pressure is still in play even if stretched.
That said, a sustained move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart is needed to reaffirm the constructive outlook. The precious metal might then test the initial resistance at the 50.0% retracement at $4,163.16 and then the 61.8% Fibo. retracement at $4,215.39. This is followed by the 78.6% level at $4,289.75 before the cycle high at $4,384.47.
On the downside, immediate support is seen at the 200-period SMA around $4,128.26, ahead of the 38.2% retracement at $4,110.93 and the 23.6% Fibo. level at $4,046.31, with a deeper floor coming in near the structural low at $3,941.85.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note EUR/USD under mild downward pressure after slipping toward 1.14, but expects any intraday decline to be limited to a test of 1.1380, with major support at 1.1360 unlikely to be challenged. Over the next 1–3 weeks, they view current price action as range trading between 1.1360 and 1.1465, with a deeper target at 1.1210 if key support breaks.
Euro-Dollar bias soft but rangebound
"24-HOUR VIEW: While we expected EUR to “edge lower” yesterday, we indicated that “any decline is likely limited to a test of 1.1390.” However, EUR did not quite test 1.1390 as it eased to a low of 1.1396. While EUR remains under mild downward pressure and could continue to edge lower today; this time around, any decline is likely to be limited to a test of 1.1380. The major support at 1.1360 is unlikely to come under threat. Resistance is at 1.1415; a breach of 1.1430 would suggest that the mild downward pressure has eased."
"1-3 WEEKS VIEW: Our update from yesterday (21 Jul, spot at 1.1415) remains valid. As highlighted, “the current price movements are likely part of a range-trading phase between 1.1360 and 1.1465.”."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/JPY trades firmly near a fresh multi-decade high at around 163.24.
- Surging Oil prices due to Middle East supply risks have weakened the Japanese Yen.
- Japan’s Katayama warns of possible intervention, but declines to comment on specific FX levels.
The Japanese Yen (JPY) hovers near a multi-decade high at around 163.24 against the US Dollar (USD) during the early European trading session on Wednesday. The USD/JPY pair reflects significant strength as the Japanese currency underperforms due to surging Oil prices.
Oil prices have increased further as global energy supply risks have escalated due to the closure of the Bab el-Mandeb Strait by Yemen’s Iran-aligned Houthis.
Higher oil prices bode poorly for currencies from economies, such as Japan, which rely heavily on energy imports.
Sheer weakness in the Japanese Yen has increased hopes of Japan’s intervention in the FX market. Earlier in the day, Japan’s Finance Minister (FM) Satsuki Katayama said that the authorities will take necessary steps on the foreign exchange if necessary. However, she declined to comment on specific forex levels.
Going forward, investors will focus on Japan's National Consumer Price Index (CPI) data for June, which will be released on Friday.
USD/JPY technical analysis
Bias: USD/JPY trades firmly at around 163.20 at press time. The overall bias is bullish as the 20-day Exponential Moving Average (EMA) slopes higher at around 162.15 and the reclaimed upward support trend line around 162.16, which both now underpin the bullish near-term bias.
Momentum: The Relative Strength Index (14) stands at 65.94, staying in positive territory just shy of classic overbought thresholds and suggesting that upside momentum remains constructive, though increasingly stretched.
Pattern: There is a Rising Wedge formation on the daily chart, which generally leads to a bearish reversal after a strong rally. However, the pair could extend the rally if it breaks the chart pattern on the upside above the upper border, which is around 163.50.
Resistance: USD/JPY could extend its advance towards 164.00 once it breaks above the immediate hurdle of 163.50.
Support: On the downside, initial support is clustered in the 162.15–162.16 area, where the 20-day EMA and the former breakout point of the rising trend line converge as a key demand zone before any deeper correction can develop.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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