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Bank of Japan maintains policy rate, raises upper band yield target


The US Dollar index dropped 0.73% daily on Tuesday, tumbling following a sudden announcement from the Bank of Japan(BoJ). Despite the Bank of Japan keeping their policy rate unchanged, the increase in the upper band limit on the yield target caused the surge of Yen and weighed on the DXY index.

US stocks oscillated between gains and losses throughout a volatile session on Tuesday, with technology shares still under pressure after last week’s hawkish central bank turn. Treasuries slumped, with the global bond market digesting the Bank of Japan’s sudden increase in its yield trading band.

FedEx Corp. and Nike Inc. reported earnings after the markets closed. FedEx posted fiscal second-quarter earnings that beat analysts’ estimates, buoyed by price increases and cost cuts that helped make up for a decline in package volume. While Nike Inc. reported another quarter of inventory buildup, its quarterly sales and gross margin exceeded Wall Street’s estimates. Shares of both firms rose postmarket. Treasuries broadly held losses, with the 10-year rate climbing to around 3.69%. Yields rose after a hawkish move from the Bank of Japan sent the yen soaring more than 4% against the dollar at one point.

The benchmark, the S&P500 ended the session with a modest gain, snapping a four-day losing streak. Seven out of eleven sectors stayed in the positive territory, and the Energy sector got the best performance among all groups, rising 1.52% daily for the day. It’s also worth noting that Consumer Discretion performed the worst among all groups, falling 1.13% on Tuesday.  The Dow Jones Industrial Average edged higher by 0.3%, the Nasdaq 100 little moved lowed 0.1%, and the MSCI World index dropped by 0.7% on Tuesday.

Main Pairs Movement

The DXY index dropped almost 0.6% during the BoJ Press Conference and further declined during the US trading hour to end below the 104 level.

The GBPUSD edged higher by 0.28% daily for the day, the positive traction mainly comes from the US Dollar pullback. The pair climbed to a daily high above the 1.2200 level when BoJ’s surprising policy adjustment, then rapidly retreated to the 1.2150 level. In the meantime, the EURUSD ended with mild growth on Tuesday, as the weak greenback provide some support.

The gold surged by 1.70% daily, benefiting from risk-aversion sentiment caused by BoJ’s surprising policy adjustment. The XAUUSD suddenly gained strong fresh transactions during UK trading sessions and stand firmly above the $1800 mark in the US trading hours.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
GBPGDP (QoQ)15:00-0.2%
GBPGDP (YoY)15:002.4%
USDGDP (QoQ) (Q3)21:302.9%
USDInitial Jobless Claims21:30222K