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Dollar Index Surges Ahead of Crucial Inflation Report, ECB and BoE Policies in Focus

The Dollar Index experienced an uptick, reaching approximately 104.6 on Friday, positioning itself near a six-week peak. This movement comes as investors eagerly await a crucial US inflation report, anticipated to shape the future direction of interest rates. However, it is expected that trading volumes will be subdued due to the US markets closing for the Good Friday holiday.
Attention is drawn to the forthcoming PCE price index report, the Federal Reserve's preferred measure of inflation, to discern whether the trend of surging inflation figures will persist. Federal Reserve Governor Christopher Waller earlier remarked that the central bank might pause rate reductions in light of robust inflationary pressures.
In Europe, ECB official Villeroy observed a significant drop in core inflation, maintaining optimism in achieving the ECB's 2% inflation goal. However, he warned of the growing risks of delaying rate cuts. Fabio Panetta, another ECB executive board member, underscored the emerging conditions favorable for monetary policy easing, noting the dampening effect of restrictive policies on demand and the consequent sharp decline in inflation. He also mentioned a diminished threat to price stability.
From the Bank of England, Jonathan Haskel adopted a hawkish stance, suggesting that rate cuts should be considerably deferred. Catherine Mann echoed this sentiment, advising against high expectations for interest rate reductions within the year. Despite this, the British Pound faced pressure due to data indicating the UK's economy slipped into a recession in the latter half of 2023, with a 0.3% contraction in GDP for Q4, aligning with initial estimates. Speculation continues around the Bank of England possibly implementing three quarter-point rate cuts through 2024, with Governor Andrew Bailey indicating such decisions will be explored in upcoming policy meetings.
The Bank of Japan's cautious approach to maintaining accommodating monetary conditions has placed downward pressure on the Japanese Yen. Recent statistics show Tokyo's Consumer Price Index rising by 2.6% YoY in March, mirroring the increase in February. Excluding fresh food and energy, the CPI saw a 2.9% YoY rise, a slight decrease from February's 3.1% increase. Prime Minister Fumio Kishida affirmed the central bank's current monetary stance and committed to collaboration between the government and the Bank of Japan to foster wage growth and combat deflation.
However, potential interventions by Japanese authorities may limit the Yen's depreciation. Finance Minister Shunichi Suzuki expressed readiness to address any erratic foreign exchange movements with urgency.
In commodities, gold prices remained robust, exceeding $2,230 an ounce amid speculation of imminent rate cuts by major central banks and increased safe-haven demand due to geopolitical tensions.
Crude oil futures also saw a rise, with WTI crude increasing by 2.24% on Thursday, marking a third consecutive month of gains. This uptrend is supported by OPEC+'s supply management efforts and ongoing geopolitical unrest in Eastern Europe and the Middle East. Notably, Ukrainian drone attacks on Russian refineries have impacted a significant portion of Russia's oil processing capability, further influencing oil prices.

Dollar Index Hovers Near Five-Month Peak Amid Mixed Economic Signals and Central Bank Speculations

The dollar index saw minimal change on Wednesday closely approaching its five-month peak of 105.1 reached the previous day. This movement came as traders evaluated strong US economic indicators and reconsidered their expectations for Federal Reserve interest rate reductions. February's job openings slightly surpassed projections, reaching 8.756 million against an anticipated 8.75 million. Additionally, factory orders experienced a more significant rebound than expected, in line with the ISM manufacturing report, which indicated the first growth in factory activity in 18 months.
On Tuesday, San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester suggested the Federal Reserve might cut interest rates three times this year. Market participants are keenly awaiting comments from Chair Powell, alongside the release of the ADP employment report and the ISM Services PMI.
In Europe, European Central Bank (ECB) official Robert Holzmann expressed openness to a rate cut in June, contingent on further supportive data. Meanwhile, ECB policymaker Yannis Stournaras hinted at the possibility of reducing rates by up to 100 basis points throughout the year, although consensus on this within the ECB remains elusive. The preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for March is anticipated.
In the UK, Bank of England (BoE) Governor Andrew Bailey noted recent signs of decreasing inflation, suggesting the economy is nearing a point where interest rate reductions could commence. However, BoE official Jonathan Haskel cautioned that such cuts should still be considered distant despite the positive trend in inflation rates. Chancellor of the Exchequer Jeremy Hunt remarked that nearing the inflation target could pave the way for the BoE to contemplate rate cuts.
The Bank of Japan (BoJ) maintains a cautious approach towards further policy tightening, which has not significantly bolstered market optimism. Japanese Finance Minister Shunichi Suzuki's comments on preventing excessive exchange-rate volatility have given some support to the Japanese Yen.
Gold prices climbed to 2288 on Wednesday, continuing their ascent amid rising demand for safe-haven assets due to geopolitical uncertainties. This increase occurred despite higher US yields and diminishing expectations for a Fed rate cut in June.
Oil prices remained at five-month highs in anticipation of an OPEC+ meeting amidst concerns over global supply disruptions caused by escalating tensions in the Middle East and renewed attacks on energy facilities in Ukraine and Russia.

Global Economic Signals Prompt Speculation on Imminent Interest Rate Cuts

On Thursday, the dollar dipped to a one-week low, influenced by recent economic data that fueled expectations for imminent interest rate reductions in the US. This downturn was initiated by an unexpected deceleration in US service sector growth on Wednesday. Despite this, the dollar has remained the top-performing currency among the G10 for the year, as expectations for rate cuts have significantly decreased in recent months.
Federal Reserve officials, including Chair Jerome Powell, emphasized on Wednesday the necessity for ongoing debate and further data analysis before any decision to cut interest rates, an action financial markets anticipate might happen in June.
In the Eurozone, the inflation rate for March fell more than expected, leading to speculation about the European Central Bank (ECB) potentially lowering interest rates in June. The Eurozone Harmonized Index of Consumer Prices (HICP) reported a year over year increase of 2.4% for March, below the forecasted 2.6%. Remarks by ECB officials, including Pablo Hernandez and Robert Holzmann, suggested that rate cuts could commence in June due to a consistent inflation slowdown across the bloc.
In the UK, futures traders are betting on a 25 basis point rate cut by the Bank of England (BoE) in June, with the probability currently at 66%. BoE Governor Andrew Bailey noted recent positive trends toward cooling inflation, suggesting that the UK economy is approaching a juncture where interest rate reductions could be contemplated. The UK's Manufacturing PMI for March showed unexpected growth after a 20 month contraction, driven by strong domestic demand and leading to a surge in business optimism among manufacturers.
The Japanese Yen (JPY) is trading slightly above a multi-decade low against the dollar, with the Bank of Japan's (BoJ) continued dovish stance and a positive market sentiment pressuring the yen. However, speculation about potential market intervention by Japanese authorities to support the yen has tempered bearish bets against it.
Gold prices remained near an all-time high of $2,300 an ounce on Thursday as investors processed remarks from Federal Reserve officials. Chair Jerome Powell stated on Wednesday that the Fed requires further evidence of inflation sustainably moving towards the 2% target before considering interest rate cuts.
Crude oil futures are trading at their highest levels since October due to supply concerns, geopolitical risks, and OPEC+ output cuts. OPEC+ announced on Wednesday that it would maintain its current oil output policy, focusing on compliance and requiring members who exceeded their supply quotas in the first quarter to present compensation plans.

Global Economic Update: Inflation Data Spurs Rate Cut Speculations Amid Mixed Market Reactions

In March, the US Producer Price Index (PPI) rose by a modest 0.2% month-over-month, falling short of the anticipated 0.3% increase. This resulted in a 2.1% year-over-year increase, marking the largest gain since April 2023. Furthermore, the Core PPI, which excludes food and energy, climbed 2.4% year-over-year, surpassing market forecasts. These figures, reported by the Bureau of Labor Statistics on Thursday, fueled optimism for potential rate cuts by the Federal Reserve (Fed) within the year.
Despite this, the financial markets have tempered their expectations, now pricing in only two rate cuts, likely starting in September. This cautious stance was reinforced by the Federal Open Market Committee (FOMC) minutes, which highlighted ongoing uncertainties about persistent high inflation and a lack of confidence in inflation stabilizing sustainably at 2%.
On the same day, the European Central Bank (ECB) maintained its key interest rates at 4.0% for the fifth consecutive meeting, while subtly indicating the possibility of a rate cut, potentially preceding the Fed's adjustments. Market speculation has led to expectations of a 25 basis point reduction by the ECB as early as June, placing downward pressure on the Euro.
In the UK, recent data from the Office for National Statistics revealed a slight 0.1% month-over-month growth in Gross Domestic Product (GDP) for February, aligning with estimates but showing a deceleration from the previous 0.3% expansion. Additionally, February's Industrial Production exceeded expectations with a 1.1% increase, rebounding from a 0.3% decline in January. The UK Goods Trade Balance also improved, registering a deficit of GBP -14.212 billion against a forecasted GBP -14.5 billion. Despite these positive indicators, the Pound Sterling remained subdued as markets anticipate an imminent rate cut by the Bank of England (BoE), potentially ahead of the Fed.
The Japanese Yen weakened to a new multi-decade low against the US dollar, influenced by the Bank of Japan's (BoJ) dovish stance and lack of clear future policy direction. This contrasts with the Fed's expected delay in rate cuts due to persistent inflation, suggesting a continued disparity in interest rates between the US and Japan, which undermines the Yen's appeal as a safe-haven currency.
In commodities, gold prices soared past the $2,400 mark, setting a record for the 17th time, driven by ongoing geopolitical tensions and the anticipation of US rate cuts. Meanwhile, crude oil prices experienced an uptick amid escalating tensions in the Middle East, though they were on track for a weekly loss, reflecting broader economic concerns.

Fed Talk Strengthens Dollar as ECB, BoE Face Different Paths

Recent comments from Federal Reserve officials have bolstered the US Dollar (USD). The US Department of Labor reported that new claims for unemployment benefits for the week ending April 13 rose by 212K, consistent with the previous week's revised count (up from 211K) and below the market consensus of 215K. This suggests that the labor market remains resilient, leading investors to anticipate a possible delay in Federal Reserve interest rate cuts until September.
Fed Chair Jerome Powell emphasized on Tuesday the need for a restrictive monetary policy to continue longer than anticipated, as inflation rates in the first quarter exceeded expectations. Atlanta Fed President Raphael Bostic commented on Thursday that he expects inflation to slowly return to the 2% target, and he is comfortable waiting, predicting potential rate cuts by the end of the year. Meanwhile, New York Fed President John Williams sees no urgent need to cut rates, asserting that the current monetary policy is effective. This narrative of maintaining higher rates for a longer period has continued to support the strength of the US Dollar.
In contrast, the European Central Bank (ECB) already hinted at possible interest rate cuts in June. ECB Vice-President Luis de Guindos expressed his willingness to ease monetary policy if the data meets expectations, and ECB policymaker François Villeroy de Galhau spoke out in favor of a rate cut in June to forestall a backlog in inflation control. ECB policymaker Joachim Nagel also conceded that an interest rate cut in June is becoming increasingly likely despite the persistently high inflation figures. This speculation has put downward pressure on the Euro (EUR).
The Pound Sterling (GBP) is currently finding temporary support at 1.2400, although the short-term outlook is clouded by risk-averse market sentiment due to escalating tensions in the Middle East. UK retail sales data published by the Office for National Statistics for March showed no change from the previous month, falling short of the 0.3% increase expected by economists. This stagnation suggests that the Bank of England's high interest rates are significantly impacting consumer spending.
In Asia, the Japanese Yen (JPY) has strengthened owing to a rise in risk aversion following reports of Israeli missile strikes on Iran, as covered by ABC News. The Yen also saw support from Japan's latest inflation data. Additionally, Bank of Japan Governor Kazuo Ueda's hawkish remarks about potentially raising interest rates if the Yen's decline significantly fuels inflation added to the JPY's strength, affecting the USD/JPY currency pair.
In commodity markets, gold prices surged following the news of the Israeli strike on Iran, reflecting a temporary flight to safety among investors. Meanwhile, oil prices saw a sharp increase of over 3% after the same news, due to concerns about potential supply disruptions in the region, although gains were later pared back.

Alphabet and Microsoft Showcase Strong Q1 2024 Earnings, Driven by AI and Cloud Computing Success

1. Strong Financial Performances: Both Alphabet and Microsoft exceeded market expectations in Q1 2024, with significant revenue and profit increases largely fueled by advancements in AI and cloud computing.
2. Strategic Investments Pay Off: Continuous heavy investments in AI and cloud infrastructure are yielding substantial returns, positioning both companies for sustained growth in the evolving tech sector.

Alphabet and Microsoft, two titans of the tech industry, released their first-quarter earnings on April 25, 2024, showcasing strong performances that exceeded market expectations, particularly in AI and cloud computing.

Microsoft’s Earnings Highlights:

1. Revenue Surge: Microsoft reported a significant 17% increase in revenue to $61.86 billion, with a net income jump of 20% to $21.9 billion. The growth was driven by its intelligent cloud segment, which saw a 23% increase to $35.1 billion, thanks to Azure’s impressive 31% year-over-year growth.
2. Investment in AI and Cloud: The company’s future outlook includes double-digit revenue growth and continued heavy investment in AI and cloud infrastructure, with capital expenditures estimated between $45 billion and $50 billion for the current fiscal year.

Alphabet’s Earnings Highlights:

1. Revenue and Profit Growth: Alphabet reported a 15% increase in revenue to $80.54 billion, with a notable quadrupling of profit in its cloud business. Operating income stood at $25.5 billion, with net income reaching $23.66 billion.
2. Segment Performance: YouTube and Google Cloud were standout segments, with YouTube ad revenue climbing to $8.09 billion and Cloud revenue hitting $9.57 billion. Google Cloud’s operating income reached $900 million, reflecting a strong operating margin of 9%.

Both companies have demonstrated that their investments in AI and cloud services are yielding substantial returns. Microsoft’s Azure and Alphabet’s Google Cloud are benefiting from the increased adoption of AI services by corporate customers, indicating a normalization of cloud infrastructure demand.
Alphabet’s after-market stock rally, which raised its market cap past $2 trillion, underscores investor confidence in its growth trajectory. Meanwhile, Microsoft’s gaming and hardware revenues faced challenges, with Xbox hardware revenue declining, although Xbox content and services revenue, including Xbox Game Pass, saw a 62% increase.
The earnings reports from both Alphabet and Microsoft send a clear message to investors that their strategic focus on AI and cloud computing is not only paying off but also positioning them for sustained growth in the rapidly evolving tech industry.
Alphabet and Microsoft’s Q1 2024 earnings results reflect their success in the tech sector’s current dynamics, with AI and cloud computing at the forefront of their growth strategies. As they continue to invest and innovate in these areas, the market can expect these tech giants to maintain their leadership positions and drive future industry trends.

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Weekly Analysis April 29- May 3
In the United States, the focus will be on the Federal Open Market Committee (FOMC) meeting, where it is anticipated that borrowing costs will remain at their current levels. Market participants will pay close attention to Chair Powell's comments for hints about potential rate cuts expected throughout the year, especially given ongoing inflationary pressures. The economic calendar is also packed, with the non-farm payrolls anticipated to show a rise of 210K in April, down from 303K in March. The unemployment rate is projected to hold steady at 3.8%, with monthly wage growth expected at 0.3%. Other significant data includes April's ISM PMI surveys, JOLTs job openings, foreign trade, the first-quarter employment cost index, productivity reports, Case-Shiller home prices, ADP Employment Change, factory orders, and regional indexes like the Dallas Fed Manufacturing Index and Chicago PMI. Additionally, the first-quarter earnings season will see updates from major corporations such as Apple, Amazon, 3M, Coca-Cola, McDonald's, Starbucks, AMD, PayPal, ADP, Estee Lauder, Mastercard, Pfizer, Amgen, Moderna, and Novo Nordisk.
In Canada, attention will be on GDP and trade data.
Europe's economic landscape will also be bustling with activity. The Eurozone is expected to report a 0.2% expansion in GDP for the first quarter after a stagnant end to 2023. Inflation is likely to stay at 2.4%, near its lowest in two years. Key releases include consumer price inflation, unemployment for March across Germany, France, Spain, and Italy, and various PMI figures. Other data to watch include the Eurozone business survey, Germany's retail sales, the UK's monetary indicators, and inflation rates from Switzerland, Turkey, and Poland.
In Asia, China's PMIs are expected to indicate a slight slowdown, which may temper optimism about the economy's momentum. Japan will release data on consumer confidence, unemployment, retail sales, industrial production, and housing starts for March, with the Bank of Japan's meeting minutes also due for release. Australia will focus on the trade balance, retail sales, housing, credit data, and the Ai Group industry gauge for April.
Overall, investors globally will have several data and earnings reports to observe, influencing market sentiments and investment decisions.

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Economic Outlook: Financial Markets React to Fed Speculation and Geopolitical Tensions

On Tuesday, gold prices surged beyond $2,320 per ounce, driven by renewed optimism that the Federal Reserve will implement interest rate reductions this year due to disappointing US job growth figures. Furthermore, comments from Fed officials indicating potential rate cuts later in the year provided additional support to gold prices, especially following Fed Chair Powell's relatively dovish statements last week. According to CME's FedWatch Tool, markets now suggest a 64% likelihood of a rate cut in September. Decreased interest rates enhance the attractiveness of holding non-yielding bullion. Meanwhile, investors are closely monitoring developments in the Middle East conflict, with Hamas agreeing to a ceasefire proposal for Gaza while Israel continued its airstrikes in Rafah, citing dissatisfaction with the terms and expressing intentions for further negotiations.
On Tuesday, the dollar index maintained its position above 105 as investors continued to evaluate the Federal Reserve's monetary policy outlook following recent statements from central bank officials. New York Fed President John Williams emphasized that decisions regarding interest rate cuts will hinge on incoming data, while Richmond Fed President Thomas Barkin expressed confidence that inflation will retreat to 2% as the effects of higher rates become evident. The index had dipped approximately 1% last week after the Fed opted to keep interest rates unchanged and Chair Powell dismissed the possibility of a rate hike to address persistent inflationary pressures, reaffirming the central bank's dovish stance despite a timing delay. April's job data revealed a gain of 175,000 jobs, down from the revised 315,000 in March and falling short of the market's expectations of 243,000. Currently, the markets are anticipating a total of 45 basis points in rate cuts for this year, with a November reduction already fully priced in.
The Japanese yen declined once again, falling below 154 per dollar and reversing gains made last week, despite assurances from top currency diplomat Masato Kanda that the government is prepared to address disorderly and speculative-driven foreign exchange movements. However, Kanda refrained from confirming whether Japanese authorities were involved in the suspected intervention last week, during which the yen rebounded by as much as 5.2% from its low. Bank of Japan data indicated that approximately $60 billion was spent in defending the currency. Nevertheless, analysts suggested that this intervention merely bought Japanese authorities some time, as market fundamentals continue to be bearish for the yen. US Treasury Secretary Janet Yellen also remarked over the weekend that interventions should be infrequent and involve consultations, hinting at a lack of coordination between Japan and the US regarding foreign exchange policy.
The Australian dollar fell to around $0.66, retracting from two-month highs after the Reserve Bank of Australia maintained the cash rate at 4.35%, as expected. Despite acknowledging stalled progress in reducing inflation, the RBA offered no explicit hawkish message. Australia's inflation rate dropped to 3.6% in the first quarter from 4.1% previously, exceeding forecasts of 3.4%. Monthly CPI accelerated to 3.5% in March from 3.4% in February, defying expectations of stability.

US Unemployment Surges, Dollar Stabilizes, Gold Rises Amid Rate Cut Speculation

In the US, the number of individuals claiming unemployment benefits surged by 22,000 to reach 231,000 for the week ending May 4th, marking the highest level since August 2023 and significantly exceeding market expectations of 210,000. This notable increase halted a streak of four consecutive downside surprises, indicating a sudden and pronounced weakness in the labor market. This development strengthens the case for the Federal Reserve to consider gradual monetary policy easing.
On Friday, the dollar index stabilized around 105.3 as investors await further comments from the Federal Reserve to gain insight into future interest rate movements. Scheduled speeches from Fed Governor Michelle Bowman, Chicago's Austan Goolsbee, Minneapolis' Neel Kashkari, and Dallas' Lorie Logan are anticipated later in the day. The dollar index faced pressure on Thursday following a surprising surge in weekly jobless claims to their highest levels in eight months, signaling a slowdown in the labor market and reinforcing expectations for Fed rate cuts this year. The probability of a rate decrease in September rose from 65% to 69% following the release of the claims data. Additionally, two Bank of England policymakers hinted at supporting a rate cut, with the first reduction expected during the summer, while the European Central Bank is anticipated to reduce borrowing costs in June.
On Friday, gold prices surged above $2,350 per ounce, supported by traders' anticipation of an interest rate cut by the Federal Reserve following recent economic indicators. Thursday's data showed a larger-than-expected rise in US jobless claims, signaling a gradual cooling of the labor market. Investors foresee the Fed commencing an easing cycle in September. Lower interest rates typically favor gold, which lacks yield. However, traders will closely watch next week's CPI and PPI releases for further clues on the Fed's monetary policy stance, especially considering some Fed officials' reservations about easing. Additionally, strong investment in the over-the-counter market, ongoing central bank purchases, and rising Asian demand contributed to gold's uptick. Furthermore, stalled ceasefire discussions in the Middle East and escalating tensions in Ukraine added to its risk premium. Gold is poised to climb by 2.2% over the week.
On May 9th, the Bank of England decided to maintain the key bank rate at 5.25%, aligning with market expectations and keeping it at its highest level since 2008. However, there was a notable shift in sentiment, with two committee members advocating for a reduction of 0.25 percentage points, compared to just one member in the previous meeting. Despite this, officials revised their inflation forecast while raising the growth outlook. According to BoE projections, the Bank Rate is anticipated to decline from 5.25% to 3.75% by the end of the forecast period. The UK economy is forecasted to expand by 0.4% in Q1 2024 and by 0.2% in Q2. However, demand is expected to lag behind potential supply growth, resulting in an economic slack margin. CPI inflation is projected to approach the 2% target in the near term, with potential risks stemming from geopolitical factors. The Monetary Policy Committee underscores the importance of a tight monetary policy to achieve sustainable inflation return to the 2% target. They emphasize their commitment to adjusting policy as necessary based on economic data.

Dollar Index Stable, Gold Prices Surge, WTI Crude Slips, BoJ Adjusts Bond Purchases

On Monday, the dollar index stabilized around 105.3 as investors prepared for crucial US inflation figures scheduled for release this week, which could shape the Federal Reserve's monetary policy stance. Last week, the index saw marginal gains as Federal Reserve officials urged caution regarding interest rate reductions. Fed Governor Michelle Bowman expressed skepticism about rate cuts in 2024, while Dallas Fed President Lorie Logan suggested it's premature to consider such measures. Additionally, recent data indicated a rise in consumer inflation expectations, although a notable decline in US consumer confidence provided further indication of economic slowdown. Despite recent trends, the markets are still expecting a potential easing cycle that is expected to begin in September while watching April's inflation data for additional insights into the future trajectory of interest rates.
Gold prices neared $2,360 per ounce on Monday, reaching their highest point in three weeks, driven by anticipation of a Federal Reserve interest rate cut in response to disappointing US employment data. Last week, reports revealed a larger-than-expected increase in unemployment claims, indicating a slowdown in job growth. This has prompted investors to anticipate the Fed's easing measures starting in September. Traders are now focusing on the upcoming April CPI and PPI releases to gain further insight into the Fed's monetary policy direction, particularly in light of concerns expressed by several Fed officials regarding potential easing. Escalating tensions in the Middle East continues to strengthen gold's appeal as a safe-haven asset. On Sunday, Israel deployed tanks to eastern Jabalia in the northern Gaza Strip following significant aerial and ground attacks during the night.
On Monday, WTI crude futures slipped below $78 per barrel, continuing a decline from the previous session due to concerns about demand-side uncertainties. Oil prices experienced a drop of over 1% on Friday following indications from US Federal Reserve officials suggesting that interest rates may remain elevated for an extended period, potentially impacting growth and reducing fuel demand in the world's leading oil consumer. Friday's data also revealed a significant decline in US consumer confidence, further indicating a slowdown in the economy. Additionally, US gasoline and distillate inventories increased in the week preceding the summer driving season, signaling weak demand. Investors are now looking ahead to OPEC's upcoming policy meeting in early June, where the group is anticipated to extend supply cuts through the latter part of the year.
On Monday, the Bank of Japan (BoJ) conducted a routine bond purchase operation, offering to buy a smaller volume of government bonds compared to its previous operation on April 24. This decision aligns with the BoJ's strategy to gradually reduce its presence in Japan's debt market. The move is expected to exert upward pressure on Japanese bond yields, potentially narrowing the significant yield gap between Japan and the US, which has been detrimental to the yen's strength. Following the BoJ's announcement, yields for the 10-year benchmark maturity rose, leading to a partial recovery of the yen's earlier losses. Governor Kazuo Ueda had previously stated in March that the BoJ aims to prioritize short-term interest rates as its primary policy tool instead of relying heavily on bond purchase operations or increasing the central bank's debt holdings. A summary of the BoJ's April policy meeting, released last week, revealed that board members are observing the impact of the weak yen on inflation and are considering the possibility of accelerating interest rate hikes. This has led to speculation that the BoJ may raise rates sooner than anticipated and reduce its debt-buying activities accordingly.

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