GBP may attempt to stabilize following a three-day slide from today’s FOMC and tomorrow’s Bank of England meeting. Although both central banks had three dissenters calling for a hike at the previous July meetings, the immediate narrative is centred on market pricing for a Fed hike and a BOE pause. However, the two central banks are expected to switch their positions at their next meetings. The Fed is expected to hold at its October 29 meeting ahead of the November 3 US midterm elections, with the market pricing in a 93% probability of a BOE hike on November 5.
Today’s UK August CPI inflation is expected to rise to 3.1% YoY (0.5% MoM) from 2.9% YoY (0.3% MoM) in July, could see the hawkish camp expand the previous 6-3 vote, given renewed energy shocks and persistent inflation risks. Closing at 1.3473 overnight, GBP/USD is slightly above 1.3430, the average of its 1.3140-1.3675 range set after Operation Epic Fury at the end of February. A support level is located at 1.3440, the 100-day moving average.
USD/JPY’s rise from its September 8 low of 152.90 may stall around the 155-156 lows seen in May and August. The Bank of Japan is expected to deliver a hawkish 25-bps hike to 1.25%, contrasting with expectations for a neutral Fed hike (or a surprise hold decision) today. Finance Minister Satsuki Katayama reminded markets that the FX policy stance remained “completely unchanged” following late July’s Japan-US joint coordinated intervention to stabilize the JPY.
As the US Treasury 10Y yield rose to the 5% threshold overnight, market anxiety shifted from Tokyo’s fiscal sustainability to heavy scrutiny of US Treasury Secretary Scott Bessent’s debt-management challenges. Finance Minister Satsuki Katayama yesterday sought to reassure markets that bond issuance will stay controlled to fund a two-year food sales tax cut starting in April 2027. Prime Minister Sanae Takaichi’s direct and targeted approach to address voter backlash over the higher living costs. In contrast, public opinion data reflect persistent high voter frustration over the Trump administration’s handling of inflation and cost-of-living issues that threaten the Republican Party’s control of both the Senate and the House at midterms.
Quote of the Day
“The future influences the present just as much as the past.”
Friedrich Nietzsche
Today in history
The Federation of Malaysia was officially formed on September 16, 1963, uniting Malaya, Singapore, North Borneo (now Sabah), and Sarawak.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.