The Japanese Yen has continued to make unusually large gains against other currencies, as markets pile into long Yen trades on the prospect of further rate hikes by the Bank of Japan.

1. The Forex market has been in focus today as the Japanese Yen has continued to make strong gains as markets adjust to the new, more hawkish policies announced by the Bank of Japana, and the prospect of more rate hikes, as the Bank of Japan is now divergent from most major central banks in the opposite direction to how it has been for the past several years. However, the hawkish tilt triggered the biggest selloff in Japanese stocks since the pandemic of 2020. The benchmark USD/JPY currency pair traded as low as ¥148.50 during today’s Tokyo session. The Japanese Yen has been the strongest major currency during this session, while the Australian Dollar has again been the weakest. Day traders will be interested in trading the high volatility in the Yen.
2. The US Federal Reserve held a policy meeting yesterday at which it left its interest rate on hold as expected. However, the meeting had a dovish impact, as Federal Reserve Chair Jerome Powell stated that central bank officials will probably cut interest rates in September unless inflation stops falling, pointing to risks of further labour-market weakening. This had the effect of sending the greenback lower, and US treasury yields to their lowest levels in over 5 months.
3. Crude Oil rose by an unusually large amount yesterday as the New York Times reported that Iran has decided to attack Israel directly following the two high-profile assassinations attributed to Israel earlier in the week, although Israel did not take responsibility for the killing of Hamas Chief Ismail Haniyeh in Teheran. Israel did take credit for assassinating Hezbollah’s military chief of staff in Beirut. Several airlines are cancelling flights to Lebanon and Israel, and reportedly, the Israeli government has assessed that there is a high chance of an all-out war breaking out between Israel and the Iranian axis. If this does happen, we can expect to see dramatic market movements in crude oil, and a chillier risk-off sentiment in other markets, likely including stock markets. The world waits to see the next move by the Iranian axis.
4. Stock markets outside Japan are mostly rising, after getting a boost from the dovish US Federal Reserve meeting yesterday.
5. The Bank of England will hold a policy meeting today at which it is widely expected to cut its interest rate by 0.25% to 5.00%, with analysts expecting an approximately 57% chance of a cut. If the cut does not happen, it could send the Pound spiking higher.
6. Bitcoin fell further yesterday, despite the recovery in global stock markets. This is a bearish sign for Bitcoin.
7. Gold rose strongly yesterday and is again approaching its recent record high price.
8. There will be releases today in the USA of ISM Manufacturing PMI data and Unemployment Claims data.

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