Overview
- Revised Cabinet Office figures published on Tuesday showed Q2 GDP grew at an annualised 1.4% and July real wages rose 2.4%, strengthening market bets that the Bank of Japan will lift its policy rate by 25 basis points next week.
- Swap-market pricing now puts roughly a 98% probability on a 25bp BOJ move to 1.25%, with traders also pricing further hikes into January, and Reuters sources say the bank is likely to stick to a conventional quarter-point step rather than a 50bp shock.
- The yen jumped to near seven-month highs as short positions were covered and higher domestic yields encouraged repatriation flows, a dynamic that is starting to unwind yen-funded carry trades and pressure Asian equity markets.
- Escalating Middle East attacks have pushed Brent toward $100 a barrel, a rise that feeds import-price inflation for energy-dependent economies and complicates central bank trade-offs between fighting inflation and protecting growth.
- RBA officials have signalled a clear willingness to tighten further if inflation stays high, keeping another Australian rate rise on the table and leaving global markets on edge ahead of US CPI/PPI prints and next week’s major central-bank meetings.