Weekly Economic & Financial Commentary: Yen Falls to 34-Year Low, Prompting Possible BoJ Intervention

May 04 24, 01:45 GMT

Summary

United States: April Brings Signs of Cooling in Economic Growth

Q2 began on a softer note. Employment growth was sturdy in April, but the 175K jobs added was the smallest gain since October. The below-consensus gain was accompanied by an increase in the unemployment rate, which rose to 3.9%. Meanwhile, an unexpected acceleration in the Employment Cost Index was the latest indication that progress on inflation is plateauing. As such, the FOMC is likely to remain in a holding pattern in the months ahead.
Next week: SLOOS (Mon.), Consumer Credit (Tue.), Consumer Sentiment (Fri.)

International: Eurozone Growth Gradually Recovering, Eurozone Inflation Gradually Slowing

Eurozone Q1 GDP growth came in stronger than expected this week, and the April CPI showed further disinflation progress as the core CPI slowed to 2.7% year-over-year. Given an overall gradual economic recovery and ebbing inflation, we still see the European Central Bank as on course to deliver an initial 25 bps policy rate cut in June.
Next week: Riksbank Policy Rate (Wed.), Bank of England Policy Rate (Thu.), Banxico Policy Rate (Thu.)

Interest Rate Watch: Stalling in Inflation Leaves FOMC Stalling for Time

As universally expected, the FOMC voted unanimously to leave the target range for the federal funds rate unchanged at 5.25%-5.50% at its meeting this week. In our view, the statement and press conference suggested the Committee is not in any rush to cut rates.

Credit Market Insights: Corporate Bonds Signal Optimism

The U.S. economy has shown remarkable resilience in the face of high interest rates. This has been reflected in the corporate bond market, which continues to signal optimism regarding future economic growth.

Topic of the Week: Yen Falls to 34-Year Low, Prompting Possible BoJ Intervention

On Monday, the Japanese yen slid to a 34-year low against the dollar, prompting what appeared to be intervention by Japan’s Ministry of Finance and central bank (BoJ) to support the beleaguered currency.