NIKKEI225 Recovers Lost Ground – BoJ Touts Rate Hike
Bank of Japan govenor Ueda announced his speech for today on Friday. Many traders believed the event was organized to give forward guidance of an upcoming interest rate hike.
- BoJ leaves further rate hikes on the table
- The timing will depend on economic growth meeting BoJ’s forecast
- Anticipation on Nvidia Earnings
The NIKKEI225 lost over 4% last week, and 2.13% on Friday alone. Concern is rising among investors regarding the path interest rate hikes are going to take.
Friday’s call for a conference on Monday led many traders to believe the BoJ governor was going to give indications of a possible interest rate hike at the December meeting.
Ueda stated that the economy was expanding and progressing towards wage-driven inflation, and warning about keeping interest too low.
The governor also said that the central bank should reduce stimulus swiftly, since keeping rates too low for too long could increase inflation faster than expected.
Interest Rate Hikes Remain on the Table
The comments leave the possibility of further rate hike open. But at the same time, the central bank chief offered no clues as to the timing of the next hike.
“The timing for when we’ll adjust the degree of our monetary support will depend on the economic, price and financial outlook,”
The comment leaves the door open for a hike in December. However, traders were expecting some clearer guidance, given the short notice of the conference.
Ueda also made it clear that the BoJ may not necessarily wait for external risk to dissipate. In reference to possible Trump tariffs and inflationary pressures from his administration’s policies.
“There are numerous uncertainties we need to scrutinise. But that doesn’t mean we will wait until all of them clear up. We’ll decide policy looking at data and information available at the time of each meeting,”
The market is still pricing a 54% chance of a rate hike at the central bank’s next policy meeting on December 18-19. That number shows very little change from the probability calculation before the speech.
Nvidia Earnings
Today the NIKKEI225 recovered some lost ground, trading up 0.35% on the day. Most of that momentum is coming from bullish expectations on the NVDA/USD earnings report later today.
Nvidia stock is up 200% YTD and has been a driving force in the AI tech rally. The same factor has often conditioned the global markets and the NIKKEI225 in the past.
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