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[MARKET ANALYSIS] JPY boosted by strong Katayama and Mimura verbal intervention, GBP continues to looks through domestic Politics ahead of BoE, EUR unch. into ECB

The JPY has seen substantial gains following strong verbal intervention from Japanese officials, indicating a serious shift in FX policy stance, which hints at potential forthcoming action if the currency remains volatile.

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[MARKET ANALYSIS] JPY boosted by strong Katayama and Mimura verbal intervention, GBP continues to looks through domestic Politics ahead of BoE, EUR unch. into ECB

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  • G10 FX are mostly stronger against the Buck after DXY fell on remarks from Japanese Finance Minister who said "getting closer to taking decisive steps in FX", and Mimura, the top FX diplomat, said "This is the final warning before FX action". This strong commentary saw USD/JPY fall 80 pips on Katayama, then a further 30+ ticks on Mimura's remarks.
  • USD/JPY, as mentioned, trades higher by around 0.6% as commentary from both officials proved more hawkish than previous verbal intervention attempts which failed to propel the JPY.
  • To briefly recap the FOMC, the Fed held rates in a 8-4 split to hold rates (Miran voted for a 25bps rate reduction; Hammack, Kashkari, Logan dissented on easing bias in statement). This shifted market expectations from a slight cutting bias to a slight tightening bias in 2026, with markets implying 2bps by year-end. DXY rose modestly following the announcement and presser to a 99.09 peak, though slipped on the aforementioned verbal intervention to mark session lows of 98.80. Danske this morning says it maintains its relatively more dovish call of two cuts, in Sep and Dec.
  • EUR/USD trades a touch below the 1.17 mark in choppy trade, with the FOMC and decent JPY moves failing to knock the single currency ahead of the ECB meeting. Full preview in the Newsquawk research suite. This morning, EZ inflation ticked up from the prior but broadly in line with expectations. There was no real reaction from the series, which sticks to the narrative that price pressures remain broadly confined to the headline measures, with the core figures steady or actually moderating from the last reading. On Energy, that lifted to 10.9% (prev. 5.1%) and remains the primary contributor to the headline rate.
  • EUR/GBP is also unchanged into the BoE and MPR, where it is expected to hold rates in a 9-0 vote split, with risks towards a dovish and/or hawkish dissent a possibility. Focus will be on any clues or hints towards the timing of the next move, and the MPC’s current view on market pricing. In terms of UK Politics, The Times reported that Former deputy PM Rayner is said to be weighing up mounting a direct challenge for the leadership after next week's local elections. Rayner is regarded as the most left-wing candidate, and also the bookies' favourite. She previously remarked, "The OBR fails to account for the wider benefits of public investment." EUR/GBP continues to trade below the 0.8670 mark, and faces support at 0.8650.
Context

This contrasts with the relatively stable EUR and GBP, which are maintaining focus on their respective central bank meetings and domestic political dynamics, suggesting that while the JPY is reacting decisively, the Euro and Pound may experience more muted movements as they await key policy announcements.

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