Forex News
- The Japanese Yen drifts lower as the upbeat market mood undermines safe-haven demand.
- Concerns about Japan’s deteriorating fiscal condition also keep the JPY bulls on the defensive.
- The divergent BoJ-Fed policy expectations should cap any further gains for the USD/JPY pair.
The Japanese Yen (JPY) remains on the back foot through the early European session on Friday, though it lacks bearish conviction amid hawkish Bank of Japan (BoJ) expectations. Traders have been pricing in the possibility that the BoJ will hike interest rates as early as next week. This marks a significant divergence in comparison to bets for more rate cuts by the US Federal Reserve (Fed), which keeps the US Dollar (USD) depressed near a two-month low and acts as a tailwind for the lower-yielding JPY.
Meanwhile, Prime Minister Sanae Takaichi's massive spending plan has exacerbated concerns about Japan's public finances amid sluggish economic growth. This, along with the prevalent risk-on environment, is holding back traders from placing aggressive bearish bets around the safe-haven JPY. Nevertheless, the JPY remains on track to register modest weekly losses, though the aforementioned fundamental backdrop suggests that the path of least resistance for the USD/JPY pair remains to the downside.
Japanese Yen bulls seem hesitant despite rising BoJ rate hike bets
- Asian stocks advanced in early trade on Friday, tracking the overnight strength on Wall Street, and undermine traditional safe-haven assets. Adding to this, concerns about Japan's public finances on the back of Prime Minister Sanae Takaichi's reflationary push keep the Japanese Yen on the back foot during the Asian session.
- The Corporate Goods Price Index released on Wednesday indicated that inflation in Japan remains above the historic levels. This validates Bank of Japan Governor Kazuo Ueda's hawkish view earlier this week that the likelihood of the central bank's baseline economic and price outlook materialising had been gradually increasing.
- This backs the case for a further BoJ policy normalization. Traders might also refrain from placing aggressive JPY bearish bets ahead of the highly anticipated two-day BoJ meeting starting on December 18. Moreover, the prevalent US Dollar bearish sentiment might keep a lid on any meaningful upside for the USD/JPY pair.
- Reuters reported this Friday that the BoJ is likely to maintain its pledge next week to keep raising rates, with the pace dependent on how the economy reacts to each increase. The report adds that the BoJ will not release an updated estimate on the neutral rate and won't use it as a main communication tool on rate-hike timing.
- In a widely expected move, the US Federal Reserve lowered borrowing costs by 25 basis points at the end of a two-day policy meeting on Wednesday and projected just one more rate cut in 2026. Investors, however, remained hopeful about two more rate cuts in 2026 in the wake of Fed Chair Jerome Powell's dovish remarks.
- During the post-meeting press conference, Powell told reporters that the US labor market has significant downside risks and the Fed does not want its policy to push down on job creation. This, in turn, keeps the USD close to an over two-month low, touched on Thursday, and should act as a headwind for the USD/JPY pair.
- Traders now look forward to speeches from influential FOMC members, which might provide some impetus later during the North American session in the absence of any relevant economic releases from the US. The focus, however, will remain glued to the highly-anticipated BoJ monetary policy meeting next week.
USD/JPY upside potential seems limited; 155.00 holds the key for bullish traders
From a technical perspective, the overnight swing high, or levels just above the 156.00 round figure, could act as an immediate hurdle for the USD/JPY pair. A sustained strength beyond might trigger a fresh bout of a short-covering move and push spot prices to the 157.00 neighborhood, or the weekly high. Some follow-through buying should pave the way for additional gains towards the 157.45 intermediate hurdle en route to a multi-month top, around the 158.00 mark, touched in November.
On the flip side, bearish traders might now wait for acceptance below the 155.00 psychological mark before placing fresh bets. The USD/JPY pair might then turn vulnerable to accelerate the fall towards retesting the monthly trough, around the 154.35 area, touched last Friday. This is closely followed by the 154.00 round figure, below which spot prices could slide to the next relevant support near the 153.60 region before eventually dropping to sub-152.00 levels.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Here is what you need to know on Friday, December 12:
The US Dollar remains on the defensive and heads for its third straight weekly decline on Friday. The prospect of the US Federal Reserve (Fed) rate cuts next year continues to undermine the USD against its six major currency rivals. Traders brace for the Fedspeak later on Friday for more clues about the US interest rate path. Cleveland Fed President Beth Hammack and Chicago Fed President Austan Goolsbee are scheduled to speak.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.04% | 0.03% | 0.00% | -0.03% | -0.06% | -0.02% | |
| EUR | -0.01% | 0.04% | 0.05% | 0.02% | -0.05% | -0.07% | -0.02% | |
| GBP | -0.04% | -0.04% | 0.00% | -0.04% | -0.08% | -0.10% | -0.06% | |
| JPY | -0.03% | -0.05% | 0.00% | -0.01% | -0.06% | -0.10% | -0.04% | |
| CAD | -0.01% | -0.02% | 0.04% | 0.00% | -0.05% | -0.08% | -0.02% | |
| AUD | 0.03% | 0.05% | 0.08% | 0.06% | 0.05% | -0.03% | 0.00% | |
| NZD | 0.06% | 0.07% | 0.10% | 0.10% | 0.08% | 0.03% | 0.05% | |
| CHF | 0.02% | 0.02% | 0.06% | 0.04% | 0.02% | -0.01% | -0.05% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Data released by the US Department of Labor (DOL) on Thursday showed that the number of Americans filing for new unemployment benefits increased to 236,000 in the week ending December 6. The figure came in above the market consensus of 220,000 and was higher than the previous week of 192,000 (revised from 191,000). This reading registered the biggest increase since mid-July 2021.
The US central bank decided to cut rates by 25 basis points (bps) in a split vote at its December policy meeting on Wednesday, putting it in a range of 3.50% to 3.75%. Two Fed officials voted to keep the rate unchanged, while Stephen Miran, whom Trump appointed in September, voted for a larger rate cut. The Fed's economic projections suggested one rate cut will take place next year, although new data could change this.
Markets are currently pricing in nearly a 75% probability that the Fed will hold interest rates steady next month, compared with a 70% chance just before the rate cut announcement, according to the CME FedWatch tool.
AUD/USD trades in a narrow trading range above the mid-0.6600s after reaching a fresh three-month high at 0.6686 on Wednesday. The pair struggles to gain ground after the release of the weaker-than-expected Australian employment data for November.
USD/JPY recovers some lost ground to above 155.75 as the prevalent risk-on environment undermines the Japanese Yen (JPY). The Bank of Japan (BoJ) interest rate decision will be in the spotlight next week. According to a December 2-9 Reuters poll, 90% of economists expected the Japanese central bank to raise short-term interest rates to 0.75% from 0.50% at the December meeting. This is a significant increase over the last Reuters survey conducted last month, which only had 53%.
EUR/USD holds steady near 1.1740 after hitting an eight-week high on Thursday. The final reading of the German Harmonized Index of Consumer Prices came in line with market consensus, rising 2.6% YoY in November, unchanged from the prior 2.6%.
GBP/USD edges lower to around 1.3375 following the weaker UK Gross Domestic Product (GDP) report. The UK GDP unexpectedly fell by 0.1% in October, compared to a 0.1% drop reported in September, the Office for National Statistics (ONS) showed on Friday. The market consensus was for a 0.1% expansion in the same period.
Gold remains close to its highest level since October 21, around $4,280. Silver rises to near $63.80 and is poised to retest its all-time high during the early European trading hours on Friday.
West Texas Intermediate (WTI) Oil price advances on Friday, early in the European session. WTI trades at $57.76 per barrel, up from Thursday’s close at $57.68.
Brent Oil Exchange Rate (Brent crude) is also up, advancing from the $61.35 price posted on Thursday, and trading at $61.41.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The UK economy remained in contraction in October, with the Gross Domestic Product (GDP) declining by 0.1% following a 0.1% drop reported in September, the latest data published by the Office for National Statistics (ONS) showed on Friday.
The market forecast was for a 0.1% increase in the same period.
Meanwhile, the Index of services (October) arrived at 0% 3M/3M versus September’s 0.2%.
Other data from the UK showed that monthly Industrial and Manufacturing Production jumped by 1.1% and 0.5%, respectively, in October.
Market reaction to the UK data
At the press time, the GBP/USD pair is losing 0.08% on the day to trade at 1.3380.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.11% | 0.06% | 0.02% | -0.01% | -0.02% | -0.00% | |
| EUR | -0.03% | 0.08% | 0.05% | -0.01% | -0.04% | -0.05% | -0.03% | |
| GBP | -0.11% | -0.08% | -0.04% | -0.08% | -0.12% | -0.12% | -0.11% | |
| JPY | -0.06% | -0.05% | 0.04% | -0.02% | -0.06% | -0.08% | -0.05% | |
| CAD | -0.02% | 0.00% | 0.08% | 0.02% | -0.04% | -0.05% | -0.02% | |
| AUD | 0.01% | 0.04% | 0.12% | 0.06% | 0.04% | -0.01% | 0.02% | |
| NZD | 0.02% | 0.05% | 0.12% | 0.08% | 0.05% | 0.00% | 0.02% | |
| CHF | 0.00% | 0.03% | 0.11% | 0.05% | 0.02% | -0.02% | -0.02% |
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 5:04 GMT on Friday as a preview of the UK GDP and Industrial data releases.
UK GDP, Industrial Production Data Overview
The United Kingdom (UK) economic docket features the monthly Gross Domestic Product (GDP) print for October and Industrial Production figures, to be published by the Office for National Statistics (ONS) this Thursday at 07:00 GMT.
The UK economy is expected to have registered a modest 0.1% growth in October, compared to the 0.1% contraction recorded in the previous month. Meanwhile, the UK Industrial Production is seen rising 0.7% MoM after declining 2% in September, while the annual output is anticipated to fall 1.2% during the reported month, following a 2.5% decline in the previous month.
How could UK GDP and Industrial Production data affect GBP/USD?
Any disappointment from the UK macro data, especially the growth figures, will reaffirm market bets that the Bank of England (BoE) will cut interest rates next week and weigh on the British Pound (GBP). The immediate market reaction, however, is more likely to remain limited amid the underlying bearish sentiment surrounding the US Dollar (USD), which continues to be weighed down by the Federal Reserve's (Fed) dovish outlook.
In contrast, better-than-expected UK economic releases should assist the GBP/USD pair to build on its recent uptrend witnessed over the past three weeks or so. Even from a technical perspective, this week's sustained breakout and acceptance above the very important 200-day Simple Moving Average (SMA) backs the case for a further appreciation for spot prices. Hence, any corrective pullback is more likely to get bought into and remain limited.
Some follow-through buying beyond the overnight swing high, around the 1.3435-1.3440 area, will reaffirm the positive outlook and allow the GBP/USD pair to reclaim the 1.3500 psychological mark. On the flip side, the 200-day SMA, currently pegged near the 1.3340 region, should protect the immediate downside, below which spot prices could weaken below the 1.3300 mark and test the next relevant support near the 1.3240-1.3235 zone.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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