The Swiss National Bank and the Bank of England both elected to maintain their respective interest rate targets at current levels yesterday, in line with predictions. The BoE decision followed the publication of the year-on-year inflation rate in the UK, which has now fallen to 2%. The 2% inflation figure has long been touted as one of the primary conditions that would enable the central bank to lower interest rates, not just in the UK but in other major economies as well. The data point, coupled with Thursday’s statement, edged the odds of an August rate cut up to 50-50.
Currency traders have not had much to wet their whistle so far this week, with the possible exception on the Japanese Yen, which gained 0.54% yesterday to close at 158.9 Yen to the Dollar. The pair is once again flirting with levels that prompted direct intervention from Japanese authorities in the beginning of May. Addressing the elephant in the room, Japan’s top currency diplomat stated that “the government will respond to excessive currency moves” and that “there is no limit for forex intervention resources”. Strong words, not to be ignored by those planning to long USDJPY. As an aside, Japanese inflation unexpectedly rose to 2.8% this morning, beating expectations of just 2.5%, further complicating the equation.
The US bank holiday seemed to have finally killed off the momentum in tech stocks, with the Nasdaq Composite breaking its streak of seven consecutive record closes to fall 0.8% on Thursday. Nvidia (NVDA) lost 3.5% by the closing bell; a multitude of major tech companies also took a breather.
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