Official preliminary data showed the eurozone consumer prices up 2.6% in July, above estimates of 2.5%.

Core prices, excluding food and energy, rose 2.9%, above estimates of 2.8%. 

The data showcases the persistent price pressures in the eurozone and almost rules out the potential of another interest rate cut by the European Central Bank in September. 

• Markets await inflation data to gauge pressure on ECB
• Pricing for ECB September rate cut at less than 50%

Euro rose in European trade on Wednesday against a basket of major rivals, gaining ground against the dollar for the first time in three sessions and holding above four-week lows amid speculation for a reduced rate gap between the US and eurozone in September. 

Hot German inflation data hurt the odds of an ECB interest rate cut in September, with investors now waiting for the whole eurozone inflation data to gather morte clues. 

The Price

The EUR/USD rose 0.15% to $1.0830, with a session-low at $1.0807. 

The pair closed down 0.1% on Tuesday, the second loss in a row, plumbing four-week lows at $1.0798 amid risk aversion.

German Inflation 

German consumer prices beat expectations for July in a sign of persistent price pressures in Europe.

The data, alongside bullish remarks by some ECB policymakers, hurt the odds of additional ECB rate cuts this year.

European Rates

The odds of an ECB interest rate cut in September are at less than 50%, as investors await more clues on the development of growth and inflation levels in the eurozone. 

European Inflation

Now investors await major European inflation data for July later today, which will provide more clues about the future of the eurozone monetary policy. 

The eurozone consumer prices index is expected to show a 2.4% increase in July, while core prices are expected to show a 2.8% increase. 

US Rates

Recent weak US data boosted the odds of Federal Reserve interest rate cuts in September and November to 100%.

Rate Gap

The Eurozone/US interest rate gap is still hovering at 125 basis points in favor of the US, and will likely shrink to 100 basis points in September. 

• Second Japanese rate hike this year
• BOJ announces policy tightening plans
• Reducing bonds purchases by 400 billion yen every quarter
• Yen about to mark biggest monthly profit since 2022

Yen rushed higher on Wednesday against a basket of major rivals, extending gains for the second day against the dollar and hitting three-month highs after a surprising decision by the Bank of Japan to raise interest rates for the second time this year. 

The BOJ announced a two-year monetary tightening plan that includes cutting government bonds purchases by 400 billion yen every quarter until it reaches the 3 trillion yen a month in the first quarter of 2026. 

The BOJ said it’ll continue to raise main interest rates and adjust its policies accordingly. 

The Price

The USD/JPY fell 0.75% To 151.60 yen per dollar, the lowest since April 9. 

The yen rose 0.8% yesterday against the dollar, the second profit in three days amid speculation about the BOJ. 

Surprising Decision 

After a two-day meeting, the Bank of Japan raised interest rates by 15 basis points to 0.25%, while analysts expected no change at 0.10%. 

It’s the second Japanese rate hike this year, after the BOJ’s similar decision at the March meeting by exiting negative rates for the first time since 2007. 

The internal vote was 7-2 in favor of the rate hike, showing increasing confidence by policymakers and the pressure of accelerating wages and prices.

Policy Tightening Plan

The BOJ announced a major two-year policy tightening plan, that includes cutting government bonds purchases by 400 billion yen every quarter until it reaches the point of purchasing 3 trillion yen a month in the first quarter of 2026, compared to 6 trillion yen a month currently. 

Such a plan will reduce the BOJ’s total holdings of government bonds by 7-8% by the financial year 2026. 

However, the BOJ asserted it remains flexible with the plan and will reassess the situation at the June 2025 meeting. 

It opened the door for a potential amendment to the plan if needed to respond to any potential economic slowdown.

Monetary Statement 

The BOJ said it expects real interest rates to remain “mostly negative”, and that accommodating monetary conditions will continue to boost the economic performance. 

It also expects forex developments to impact prices in the country more than before.

The BOJ’s Forecasts 

The Bank of Japan expects consumer prices to reach 2.5% by the end of 2024, down from 2.8% in previous forecasts.

It expects core prices to dip to 1.9% by the end of the financial year of 2024. 

It expects another dip in consumer prices to 2.1% in 2025, while core prices are expected at 1.9% in 2025. 

The BOJ maintained its estimates for total GDP growth at 0.6% in 2024, and at 1% in 2025. 

Monthly Trades

Yen is up 5.75% against the dollar so far in June, about to mark the biggest monthly profit since November 2022.

The massive gains were triggered by the unwinding of the carry trades before the BOJ’s policy meeting, and the full pricing of Fed interest rate cuts in September and November. 

Ripple rose on Tuesday as most cryptocurrencies lost ground while markets await the results of the Federal Reserve’s policy meeting.

The Fed started convening its two-day policy meeting today, expected to provide important clues on the timing of the next interest rate cuts this year. 

It’s worth mentioning that rate cuts from global central banks, chief of which the Fed, will boost liquidity and increase demand on high-risk assets. 

A Conference Board survey showed the US consumer confidence index rose to 100.3 in July from 97.8 in June, passing estimates of 99.7. 

The JOLTS job openings fell to 8.18 million in June from 8.23 million in May.

The Ripple 

On trading, the Ripple rose 3.7% on CoinMarketCap as of 20:58 GMT to $0.6275.