• BOJ announce no change to yield curve control (YCC) and no monetary policy change
• A look at how the BOJ has adjusted its yield curve control program
• 10-year JGB yields jump to its highest levels since 2014
• BOJ governor Ueda: Need to patiently continue monetary easing to support the economy
• BOJ’s Ueda: We aim to rely on markets to determine long-term rates but there are limits
• ECB’s Villeroy: Upcoming meeting decisions will be entirely data driven
• ECB’s Kazimir: Premature to consider a September pause the end of the tightening cycle
• ECB’s Simkus: Choice in September is between 25 bps rate hike and no change
• Germany Q2 preliminary GDP 0.0% vs +0.1% q/q expected
• France Q2 preliminary GDP +0.5% vs +0.1% q/q expected
• Spain Q2 preliminary GDP +0.4% vs +0.4% q/q expected
• Bavaria July CPI +6.1% vs +6.2% y/y prior
• France July preliminary CPI +4.3% vs +4.3% y/y expected
• Spain July preliminary CPI +2.3% vs +1.6% y/y expected

Markets:

• GBP leads, AUD lags on the day
• European equities mixed; S&P 500 futures up 0.5%
• US 10-year yields down 4.5 bps to 3.966%
• Gold up 0.6% to $1,956.54
• WTI crude down 0.2% to $79.90
• Bitcoin up 0.2% to $29,196

It was a busy session in markets as traders and investors had to digest an adjustment by the BOJ on its yield curve control program.

The leaked report from the Nikkei changed the complexion ahead of today’s decision and it certainly delivered plenty of volatility in markets with the USD/JPY itself seeing a 300 pips whipsaw.

The BOJ announced that it would allow more flexibility above its cap of 0.50% on 10-year JGB yields, with the hard line now being drawn at 1.00% instead. USD/JPY rose initially as the yields band itself was not changed, rising from 139.15 to 141.00 before falling all the way back to 138.05 as traders digested the change.

After a trip back to touch 140.00, the pair is now falling back to 138.85 in a volatile session for the Japanese yen.

As 10-year JGB bonds sold off, the move also saw some angst in bond markets elsewhere. European bond yields surged higher at the start of the session but have now pared the jump, with 10-year German bond yields now flat at 2.43% (the high earlier 2.55%). 10-year JGB yields did surge past the 0.50% mark though, to 0.56% – its highest levels since 2014.

But the latest retreat in bond yields now is helping to put a fresh drag on the dollar as well. 10-year Treasury yields are down 4.5 bps to 3.966% and that is weighing on the greenback – especially against the euro and pound.

EUR/USD is up 0.3% to just above 1.1000 again while GBP/USD is up 0.6% to 1.2870 levels currently.

Equities were unsure initially of the BOJ decision as well with US futures paring early gains only to rally back again. S&P 500 futures are up 0.5% and that’s a signal that investors are taking the view on a potential Fed pause with more weight. European indices were also lower at the start, playing catch up to the late retreat in Wall Street yesterday, but are now trading little changed.

Despite risk sentiment holding up somewhat, the Australian dollar continues to be trounced but that perhaps owes more to the technicals as outlined here. AUD/USD is down 0.5% today to 0.6670 currently.

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