<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/japan-top-currency-diplomat-says-that-they-have-intervened-in-the-fx-market-20220922/“>Japan top currency diplomat says that they have intervened in the FX market</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/japan-finance-minister-says-decided-to-intervene-after-examining-overall-trend-20220922/“>Japan finance minister says decided to intervene after examining overall trend</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/historic-moment-for-the-yen-but-is-it-enough-20220922/“>Historic moment for the yen but is it enough?</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/usdjpy-down-1-as-japan-intervenes-to-buy-the-yen-for-the-first-time-since-1998-20220922/“>USD/JPY tumbles as Japan intervenes to buy the yen for the first time since 1998</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/snb-raises-policy-rate-by-75-bps-to-050-as-expected-20220922/“>SNB raises policy rate by 75 bps to 0.50%, as expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/swiss-franc-weakens-as-snb-puts-an-end-to-the-negative-interest-rates-era-20220922/“>Swiss franc weakens as SNB puts an end to the negative interest rates era</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/boe-raises-bank-rate-by-50-bps-to-225-as-expected-20220922/“>BOE raises bank rate by 50 bps to 2.25%, as expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/markets-pare-back-boe-rate-pricing-in-the-aftermath-of-the-policy-decision-20220922/“>Markets pare back BOE rate pricing in the aftermath of the policy decision</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/bojs-kuroda-will-patiently-continue-powerful-monetary-easing-20220922/“>BOJ’s Kuroda: Will patiently continue powerful monetary easing</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/bojs-kuroda-no-need-to-change-forward-guidance-at-the-moment-20220922/“>BOJ’s Kuroda: No need to change forward guidance at the moment</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-schnabel-we-must-further-increase-interest-rates-20220922/“>ECB’s Schnabel: We must further increase interest rates</a></li></ul><p style=““ class=“text-align-justify“>Markets:</p><ul><li>JPY leads, CHF lags on the day</li><li>European equities lower; S&P 500 futures down 0.2%</li><li>US 10-year yields up 3.8 bps to 3.549%</li><li>Gold down 0.2% to $1,670.49</li><li>WTI crude up 1.2% to $83.92</li><li>Bitcoin up 1.1% to $19,140</li></ul><p style=““ class=“text-align-justify“>What a wild day this has turned out to be (and we’re not done yet!) as the central bank bonanza this week was upstaged by Japan intervening to prop up the yen for the first time since June 1998.</p><p style=““ class=“text-align-justify“>The BOJ kept monetary policy unchanged and Kuroda delivered the usual snoozefest in his press conference before markets decided to push USD/JPY to fresh cycle highs above 145.00 going into European trading. The high touched 145.89 before it all came crashing down as Japan announced that they have intervened in the FX market to buy the yen.</p><p style=““ class=“text-align-justify“>USD/JPY quickly fell to 142.50 before extending that drop to a low of 140.66 in highly volatile trading. There have been big swings in between then and now with the pair holding lower by 1.5% currently at 141.90 at the time of writing.</p><p style=““ class=“text-align-justify“>The retreat in USD/JPY also sparked a decline in the dollar elsewhere with EUR/USD inching up towards 0.9900 before slipping back down to 0.9860 currently. GBP/USD was up to 1.1350-60 early on before seeing gains erased to 1.1280-90 levels now after the BOE raised the bank rate by 50 bps, as anticipated.</p><p style=““ class=“text-align-justify“>The Swiss franc was the other big mover today as it crumbled after the SNB decided to raise its policy rate by 75 bps – meeting expectations but market pricing had it for a 100 bps move. I want to say that the Swiss central bank is also trying to smooth out the franc appreciation and this was the best time to have done that.</p><p style=““ class=“text-align-justify“>EUR/CHF is up nearly 2% in a surge higher from 0.9470 to 0.9680 now with the high earlier touching 0.9715. USD/CHF is also up 1.6% to 0.9815 at the moment with the earlier high touching 0.9851 – testing key technical resistance as outlined <a target=“_blank“ href=“https://www.forexlive.com/news/swiss-franc-weakens-as-snb-puts-an-end-to-the-negative-interest-rates-era-20220922/“ target=“_blank“>here</a>.</p><p style=““ class=“text-align-justify“>Elsewhere, equities were taken for a ride with early losses in US futures turning into gains before being erased again now as we look towards the open in Wall Street. European indices are down markedly as they are playing catch up to the post-FOMC declines in US stocks yesterday.</p><p style=““ class=“text-align-justify“>But for the time being, the FX market is stealing the spotlight after a historic day in which Japan decided to take action to defend the yen currency for the first time in over 24 years.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The split in votes is one thing but with the fact that they are hinting at peak inflation coming in lower while offering up a maybe on tightening aggressively, it’s not exactly what the hawkish camp had hoped for. All of that covered <a target=“_blank“ href=“https://www.forexlive.com/centralbank/boe-raises-bank-rate-by-50-bps-to-225-as-expected-20220922/“ target=“_blank“>here</a>.</p><p style=““ class=“text-align-justify“>And when you throw in the fact that market pricing did look for 75 bps and the BOE „only“ delivered 50 bps as per economists‘ expectations, it’s enough to dial back some of the future pricing for BOE tightening.</p><p style=““ class=“text-align-justify“>Coming into the decision, the OIS market had fully priced the bank rate to be at 3% by November. That has now dropped to pricing in ~75% odds of 2.75% instead now. Adding to that, there have been consistent pullbacks for the 2023 meeting dates for the BOE by roughly 25 bps across the curve as well.</p><p style=““ class=“text-align-justify“>The pound dropped from 1.1350 to 1.1280 initially before holding around 1.1300 now against the dollar. It’s not much of a sizable reaction as compared to the Swiss franc but the decision today will do little in terms of helping cable sustain any mildly positive momentum against the dollar if you compare this to how the Fed was yesterday.</p>

This article was written by Justin Low at forexlive.com.

<ul><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/boe-raises-bank-rate-by-50-bps-to-175-as-expected-20220804/“ target=“_blank“>Prior</a> 1.75%</li><li style=““ class=“text-align-justify“>Bank rate vote 9-0* vs 9-0 expected (*Haskel, Mann, Ramsden voted for 75 bps, Dhingra voted for 25 bps)</li><li>Sterling has depreciated materially since August</li><li style=““ class=“text-align-justify“>Uncertainty around the outlook for UK retail energy prices has fallen after government’s energy support plan</li><li style=““ class=“text-align-justify“>Consumer spending is likely to have peaked in this quarter</li><li style=““ class=“text-align-justify“>Peak inflation is now likely to be lower than projected in August, at just under 11% in October</li><li style=““ class=“text-align-justify“>Policy is not on a pre-set path</li><li style=““ class=“text-align-justify“>Should the outlook suggest more persistent inflationary pressures, including from stronger demand, BOE will respond forcefully, as necessary</li><li><a target=“_blank“ href=“https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/september-2022″ target=“_blank“ rel=“nofollow“>Full statement</a></li></ul><p style=““ class=“text-align-justify“>There’s a bit of give and take in the latest policy decision by the BOE here. The split in votes obviously don’t help to give markets a sense of confidence on their resolve to tighten aggressively. Add that to the fact that market pricing had considered a 75 bps rate hike but we only got 50 bps, as per what economists expected.</p><p style=““ class=“text-align-justify“>But the good news comes from the fact that the BOE is offering up a more optimistic outlook on inflation. As for economic activity, they see Q3 GDP as being -0.1% q/q and that will infer a technical recession in the UK. But on the balance of things, the brighter inflation outlook perhaps matters more as they view peak inflation to be lower now.</p><p style=““ class=“text-align-justify“>Besides that, there is a subtle change to the forward guidance, which I would perceive to be offering them flexibility to act less aggressively i.e. move back to 25 bps rate hikes. In August, they noted that:</p><p style=““ class=“text-align-justify“>“The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.“</p><p style=““ class=“text-align-justify“>Today, the statement reads:</p><p style=““ class=“text-align-justify“>“Should the outlook suggest more persistent inflationary pressures, including from stronger demand, the Committee will respond forcefully, as necessary.“</p><p style=““ class=“text-align-justify“>It ties to their peak <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_5″ class=“terms__main-term“>inflation</a> view coming lower and while it’s no major change in policy stance, it is a subtle one as the words should and suggest do give them some leeway to work with moving forward.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>The backlash against the swissie is continuing to play out in the aftermath of the SNB policy decision earlier today. The Swiss central bank hiked its policy rate by 75 bps, as expected, but markets had sought to price in a 100 bps move going into the decision.</p><p style=““ class=“text-align-justify“>That saw a quick surge lower in the franc, with EUR/CHF moving up from 0.9470 to 0.9600 before pulling higher now to 0.9700. After the BOJ, one has to wonder if the SNB also has a part to do with the latest move in the market today as the franc falls to its lowest since 12 September against the euro.</p><p style=““ class=“text-align-justify“>Now, after their policy shift in June, the SNB has been a key driver for the franc appreciation over the past few months in a fall from 1.0500 at the time to 0.9500 this week. One can argue that perhaps there is some scope for a retracement but on the balance of things, the landscape for EUR/CHF hasn’t changed.</p><p style=““ class=“text-align-justify“>The question now is whether the SNB will keep following up on more aggressive rate hikes and I would point to their higher inflation forecasts today as being a suggestion that the likelihood remains high.</p>

This article was written by Justin Low at forexlive.com.

<p>Suzuki (Japan’s finance minister):</p><ul><li>Will not comment on the size of intervention</li><li style=““ class=“text-align-justify“>Will not say if this was solo or a „concerted intervention“; latter is difficult to define</li><li style=““ class=“text-align-justify“>Have explained Japan’s FX concern to other G7 countries since last year</li><li style=““ class=“text-align-justify“>Intervention cannot be tied to specific currency level, will watch overall trend</li><li style=““ class=“text-align-justify“>FX moves today were rapid, no hints about what level would trigger intervention</li></ul><p>Kanda (Japan’s top currency diplomat):</p><ul><li>Never thought about levels in deciding intervention</li><li>Will not disclose if there were any exchanges with other countries</li><li>Action can be taken any day, any time, including on holidays</li></ul><p style=““ class=“text-align-justify“>I don’t see how after a 26% decline this year, suddenly they see today’s moves as being one that is „over the line“. It is clear that the 145.00 mark was a trigger point but for their own sake and effectiveness of the intervention, they cannot admit that. But what is also clear is that they are more focused on the pace of the decline in the yen, rather than any specific level perhaps.</p><p style=““ class=“text-align-justify“>I mean after the Fed was more hawkish and BOJ did nothing again, the amplification of policy divergence and traders pushing past 145.00 earlier might have triggered a quick push towards 150.00 potentially.</p><p style=““ class=“text-align-justify“>Instead, USD/JPY stumbled from 145.80 to a low of 140.66 earlier but is now trading back up to 143.33 as the volatility swings continue. The big picture outlook is still intact despite the drop today, with the pair holding above 140.00 for now – providing a base for buyers to keep angling towards 145.00, albeit perhaps with less conviction in the near-term.</p>

This article was written by Justin Low at forexlive.com.