The Bank of Japan surprised markets overnight by widening the range of their 10-year bond. The Japanese central bank operates yield curve control, in essence, controlling the yield on bonds via their own bond purchases. Overnight they increased the band from 0.25% to 0.50%. This led to a surge in the value of the yen which saw USDJPY fall from around 137.00 to 133.00 in an hour or so. This has had an impact on other pairs with the pound and euro trading in almost 1.3% ranges. Equity markets have been hit hard, with major indices down over 1% since last night’s close.
On the data front, today’s economic calendar is light with German inflation data and Canadian retail sales as the highlights. More importantly, markets will continue to digest the surprise from the BoJ which will add extra spice to markets as they continue to wind down for the holidays.
Written by Viv Savani. 8:26am, December 20th 2022
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