The Nikkei had this:

• Bank of Japan to end negative interest rates on Tuesday with rates to rise to 0.00-0.10% … Yet-another Bank of Japan leak

Bloomberg (gated) has canvassed MUFG (Mitsubishi UFJ Financial Group is a Japanese financial services group that is the largest in the world measured by assets) and reports this:

• „Given the stronger-than-expected wage talk outcome, the BOJ will likely ditch negative rates and yield curve control next week,“ said veteran BOJ watcher Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
• „The BOJ could have waited until April if the wage talk outcome wasn’t this strong. But with markets already pricing in the chance of an exit, it would actually be a surprise if the bank forgoes ditching negative rates next week,“ she said.

From a separate report, on Rengo, a federation of unions, saying its members have so far secured deals averaging 5.28%, a figure that far outpaces the initial 3.8% tally from a year ago and easily the highest in 30 years:

• “This clears the last hurdle for the BOJ and I think it will scrap its negative rate next week and make a shift toward policy normalization,” said Taro Saito, head of economic research at NLI Research Institute. “If they stand pat now, markets will get volatile and the yen is likely to plunge.”

And, Reuters:

• Upon exiting its negative rate policy, the BOJ will also ditch its bond yield control and discontinue purchases of risky assets such as exchange-traded funds (ETF), sources have told Reuters

I did convey more cautious thoughts from UBS:

• Bank of Japan won’t tighten policy next week – here’s why they’ll wait until April

But I think they may be standing in front of a freight train.

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The BOJ announcement will come sometime after 0230 GMT on Tuesday 19 March. The Bank doesn’t have a firmly scheduled time for its meeting statement, it never does.

This article was written by Eamonn Sheridan at www.forexlive.com.

• NY Fed empire manufacturing survey for March -20.90 vs -7.00 estimate
• UMich March prelim consumer sentiment 76.5 vs 76.9 expected
• Canada January wholesale trade +0.1% vs -0.6% expected
• US February industrial production +0.1% vs 0.0% expected
• ECB’s Makhlouf: Picture should be sufficiently clear in June
• ECB’s Lane: Labor market is softening in many ways
• ECB’s Vujcic says prefers 25 bps pace of cuts but weaker economy could speed the pace
• Goldman Sachs raises average gold price forecast for 2024 to $2180 from $2090.
• US February import prices +0.3% vs +0.3% expected
• Canada February housing starts 253K vs 230K expected

Markets:

• Gold down $4 to $2156
• US 10-year yields up 2.3 bps to 4.33%
• WTI crude oil down 28-cents to $80.98
• S&P 500 down 0.6%
• EUR leads, NZD lags

The Ides of March passed without much drama this year as the dollar made gains in Asia and Europe then largely hung onto them in North American trade. The empire survey was soft and UMich was generally in line but neither one left ripples.

The market appears to have been driven by fixed income flows and angst about the BOJ and Fed next week. Those two central banks are headed in opposite directions but you wouldn’t know if from USD/JPY, which rose again. That pair appears to be more worried about bond market structural changes from the BOJ than rate differentials. That pushed US 10s to a retest of the highs of the year (but not above). USD/JPY climbed to a high of 149.17 in a 30 pip rally in US trade and is slated to finish near the highs.

Another BOJ leak suggests that a hike is priced in, though I imagine there are still fears about mechanical breaks on the first hike in 17 years.

There was some moderate USD buying elsewhere on higher yields and risk aversion. US equities were hit for the second day with many pointing to quad witching as a driver. Adobe was also beaten up in a sign that AI hype might be flagging.

We look forward to the BOJ and Fed meetings next week. Until then, have a great weekend.

This article was written by Adam Button at www.forexlive.com.

• Dow industrial average -190.91 point or -0.49% at 38714.76
• S&P index -33.37 points or -0.65% at 5117.10
• NASDAQ index -155.37 points or -0.96% at 15973.16

For the trading week, the Dow Industrial Average was near unchanged. The NASDAQ index was the weakest of the three:

• Dow industrial average, -0.02%.
• S&P index -0.13%
• NASDAQ index, -0.70%

Looking at the small-cap Russell 2000 index it rose today but was down sharply on the week:

• Russell 2000+8.146 points or 0.40% at 2039.32. For the trading week, the index fell -2.08%

This article was written by Greg Michalowski at www.forexlive.com.

ANZ highlights the unexpected resilience of physical gold demand despite the surge in prices, attributing steady global consumption levels to strong interest from China and India. The report discusses the potential limits to further demand growth due to the prolonged period of elevated prices.

Key Points:

1. Steady Global Consumption: Global gold demand remained consistent at 3,057t in 2023, closely aligning with the decade’s average despite record-high prices.
2. China’s Strong Demand: A 16% year-on-year increase in China’s gold consumption to 959t in 2023, driven by pent-up demand and a shift towards value preservation amidst economic uncertainties.
3. India’s Sustained Interest: India’s gold consumption slightly declined in 2023 but stayed near pre-pandemic levels, supported by a growing affluent population.
4. Price Sensitivity and Demand Outlook: While physical demand has shown resilience, the continued high price levels may challenge further growth in demand, especially in key markets like China and India.

Conclusion:

Despite the challenges posed by sustained high gold prices, physical demand for gold has shown remarkable resilience, particularly in major markets such as China and India. ANZ suggests that while this trend demonstrates the underlying strength and appeal of gold as an investment, the potential for significant demand growth may be curtailed unless there’s a notable change in price trends. Demand is expected to remain stable, reflecting the balance between value preservation motives and price sensitivity among consumers.

Gold today is down $4 to $2156.

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This article was written by Adam Button at www.forexlive.com.

„The Bank of Japan is expected to end its negative interest rates when its policy board meets on Monday and Tuesday, Nikkei has learned.“

They report that the BOJ began coordinating both within and outside the BOJ on Friday to end the policy. Rather than just hiking to 0.00%, as assumed, the BOJ will hike to a range in the 0.00-0.10% range.

The final piece of the puzzle appears to be the latest wage numbers, something we’ve been highlighting.

This year’s wage hikes „are of a level that even reflationists who are cautious about modifying monetary policy would accept a change in policy,“ according to a BOJ source.

There has been minimal market reaction to this report, which suggests that the moves are already priced in.

The moves will also end yield curve control and scrap purchases of ETFs and REITs.

USD/JPY last traded at 149.05, up 73 pips today and unchanged since this report.

This article was written by Adam Button at www.forexlive.com.