Yen Fails to Rally in Risk-Off Trade as BoJ Hike Slips Further Out – Action Forex

Risk-off sentiment continues to drive global markets this week, but the traditional safe-haven Yen is gaining little traction from the turbulence. The currency’s inability to capitalize on the broad defensive tone reflects an overriding theme: expectations that the BoJ’s long-awaited rate hike will be pushed back once again.

Political pressure from the new government has already all but ruled out a move in December. However, the market’s base case of a January hike is now being questioned too. Former BoJ board member Goushi Kataoka, who now serves on Prime Minister Sanae Takaichi’s flagship economic panel, openly urged the central bank to wait even longer.

Kataoka argued it would be “premature” for the BoJ to lift rates to 0.75% in December or January and said the central bank should wait until March or April. He stressed the need for policymakers to assess the impact of the government’s upcoming stimulus package—expected to exceed JPY 20 trillion, according to Kyodo—and to gather more information on next year’s wage negotiations. His comments carry weight given his history as one of the most dovish voices on the BoJ board from 2017 to 2022.

The timing debate will get fresh attention today as BoJ Governor Kazuo Ueda meets with key government ministers, including Finance Minister Satsuki Katayama. Markets are watching closely for any subtle signals on how strongly the administration intends to lean on the central bank to avoid premature tightening.

In Europe, UK CPI data is the main macro highlight for the session. Headline inflation is expected to dip from 3.8% to 3.5% in October, with core slipping from 3.5% to 3.4%. Unless there is a major surprise, the release is unlikely to shift expectations for a December BoE rate cut. The real swing factor remains next week’s Autumn Budget, where uncertainty still hangs over whether the government will resort to tax hikes to plug the fiscal shortfall.

The FOMC minutes from the October meeting will be closely parsed too. Markets will look for clues on how close the Fed came to another rate cut, especially with futures now pricing less than 50% chance of easing in December. Still, the biggest catalyst for expectations may be Thursday’s delayed September non-farm payrolls report, now set to land after weeks of data blackout during the government shutdown.

Overall in the currency markets this week, Kiwi is currently the weakest performer, followed by Aussie and then Swiss Franc. At the top of the table sits Loonie, followed by Dollar and then Sterling, while Euro and Yen are holding the middle ground.

In Asia, at the time of writing, Nikkei is down -0.16%. Hong Kong HSI is down -0.70%. China Shanghai SSE is down -0.17%. Singapore Strait Times is down -0.06%. Japan 10-year JGB yield is up 0.013 at 1.762. Overnight, DOW fell -1.07%. S&P 500 fell -0.83%. NASDAQ fell -1.21%. 10-year yield fell -0.010 to 4.123.

Australia wage price index rises 0.8% qoq in Q3, private sector underperforms

Australia’s wage price index rose 0.8% qoq in Q3, matching expectations and holding the same pace as Q2. The headline stability masks a mild divergence across sectors: private-sector wages increased 0.7% qoq while public-sector wages climbed 0.9% qoq, continuing their recent outperformance.

On an annual basis, wage growth came in at 3.4% yoy, unchanged from Q2. Public-sector pay rose 3.8% yoy, edging up from last year’s 3.7%. Private-sector wage growth slowed to 3.2% yoy from 3.5% in September 2024. This marks the third consecutive quarter in which public wages have grown faster than their private counterparts.

Barkin says Fed flying blind as data blackout ends

Richmond Fed President Thomas Barkin said the U.S. central bank is facing pressure on both sides of its mandate, with inflation still above target and job growth clearly slowing. However, he noted that the picture is not one-directional, as consumers are increasingly resisting price increases while a contraction in labor supply has kept the unemployment rate stable.

Barkin described the Fed’s current environment as akin to “docking a boat at night without a lighthouse,” highlighting the difficulty of judging policy in the absence of timely government data during the shutdown. The upcoming release of delayed reports, he said, will offer much-needed clarity on both inflation and labor market dynamics.

“I think we have a lot to learn between now and then,” Barkin added, suggesting that the December decision remains highly data-dependent as policymakers wait for the first full set of figures since the government reopened.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 203.87; (P) 204.31; (R1) 204.92; More…

GBP/JPY’s rally is still in progress and intraday bias stays on the upside for 205.30 resistance. Firm break there will resume whole rise from 185.43 and target 208.09 high. For now, further rise is expected as long as 102.31 support holds, in case of retreat.

In the bigger picture, price actions from 208.09 (2024 high) are seen as a corrective pattern which might have completed at 184.35. Firm break of 208.09 high will resume the up trend from 123.94 (2020 low). Next target is 61.8% projection of 148.93 to 208.09 from 184.35 at 220.90. However, decisive break of 197.47 support will dampen this view and extend the corrective pattern with another fall.