Buck trading tightly, FX interventions may become a thing

Indeed, there is a lot going on, but seems like tensions overall have eased after the end of July, which was eventful as well as confusing. The war has gone on for a long time and the escalation-towards-de-escalation roller-coaster has almost desensitized traders and investors, but it looks like the push for diplomacy is earning more sway.

After proposing a wave of major attacks over Iran, the U.S. chose to instead pause strikes after many Gulf states contacted American authorities to minimize the damage allies have taken as more forces have joined other parts of the Middles East to support Tehran’s influence and survival. Naturally, and as we have seen already, the S&P 500 futures are up and oil prices are calming down.

Although not everyone was declaring it originally, it seems clear that Japanese financial officials worked very much in coordination with the United States Treasury Department as well as South Korea to intervene in the value of the Japanese Yen. U.S. Secretary Scott Bessent said the U.S. stepped in to help in combating “disorderly movements.” The Yen has appreciated in value by 4.3% since last Wednesday. On the domestic front, we shall see plenty of data for labor throughout the week ahead of the grand finale featuring Non-Farm Payrolls and the Employment Situation on Friday.

What to Watch This Week…

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JPY

The Japanese Yen is having a tremendous moment of advancement as FX interventions have successfully gotten the price of Yen to the Dollar far away from its weakest point since the 1985 Plaza Accords had to take place. Back then, a global agreement had to be established to curtail the dominance of the USD. Finance Minister Satsuki Katayama exclaimed that she was ready to conduct further joint U.S.-Japan operations and that Friday’s type of action, involving approximately U.S.$34.0BN, could happen again soon. The Bank of Japan will not be meeting until September 18th, so we shall see how dramatic things get in the next six weeks prior to a possible hike of interest rates, currently standing at 1.0%.

EUR

The Euro closed out July with a 1.3% gain after jumping and declining rapidly based on concern that the effects of the wars, Persian Gulf and Russia/Ukraine, were weighing heavily on the Euro-zone. While indeed times have been rough, data has pointed at European resilience and a willingness to maintain interest rates unchanged. Inflation has remained steady while growth and productivity have surprised by staying positive. An earlier release of S&P Eurozone Manufacturing Purchasing Managers Index revealed things in July had basically the expected reading indicating expansion. August can be somewhat more holiday-driven across the pond, but there will be some interesting items as well as jumpy headlines over conflict that shall influence the shared currency.