Last week, the focus was on the Bank of England’s policy meeting.

From the outset, no policy change was expected, but the focus was on what decision would be made ahead of the June rate cut, with the probability of a rate cut seen to increase if the inflation forecast for 2026 came in below 2.0%. As a result, the pound was sold off in a 7-2 verdict, as expected. Similarly, many players sold the Eurodollar on the idea of lower European interest rates on the recent Swedish rate cut.

However, when US initial jobless claims were announced at 231 000, which was higher than expected, dollar selling prevailed and as a result, Eurodollar and Pounddollar were short-covered and ended higher.

In Japan, a meeting between Prime Minister Kishida and Bank of Japan Governor Ueda took place. The dollar fell by about JPY 8 from its highs in the week before last, partly due to intervention, but was pushed up by real demand after the Golden Week holiday. The rebound to the high ¥155s was partly due to the fact that it was a 50th day (a day with a 5 or 10). Many parts of the market have been knocked out, and there seems to be a strong appetite for buying at lower prices. With limited intervention, the only way to stop the yen from weakening is to raise interest rates. After the meeting, Governor Ueda, of course, could not talk about anything, so he stuck to his traditional statements. He could not say that there had been a request for an interest rate hike. Regarding foreign exchange intervention, Treasurer Kanda made “no comment” in response to comments from US Secretary Yellen. Although it is not known what kind of communication took place behind the scenes, it is assumed that there was criticism of the intervention. I would have liked to hear him say that he could intervene 24 hours a day, but I guess he can no longer say so.

The key for USD/JPY will be the half-way back level of 156.03 yen. Above there, it would mean 157 yen. BOJ Governor Ueda has subtly revised his comments and indicated that he intends to make the exchange rate more policy relevant, but this has not had enough impact to change the direction of the yen. It would be no big deal if he suggested a reduction in the amount of JGB purchases in his ‘Main Opinion’.