FX168 Financial News (Asia Pacific) - On Friday (August 23rd), the Asian markets experienced significant volatility. Haruhiko Kuroda, the Governor of the Bank of Japan, stated that if the economy and inflation meet expectations, the central bank still plans to raise interest rates. The yen rose by 0.5%, and Japanese stocks fluctuated before ending slightly higher.
This statement has disappointed some people. The market's sharp turn towards dovishness, which prompted policymakers to shift their stance three weeks ago, is now a thing of the past. Despite the fluctuation of the Nikkei Index, it ultimately rose by 0.4%, and the domestic yield rose by 2 basis points.
The support for the views of the Governor of the Bank of Japan comes from the inflation data released earlier that day, which indicated that Japan's core inflation accelerated to 2.7% for the third consecutive month in July.
The 'core-core' index (excluding food and energy costs) declined to 1.9%, but it remains near the Bank of Japan's 2% target.
Traders still consider the likelihood of an interest rate hike in October to be low, but the probability of a rate hike in December is now priced at 70%.
It's Powell's turn.
On the other hand, as Federal Reserve Chairman Jerome Powell's speech at Jackson Hole approaches, market sentiment has turned cautious. All major stock markets are down, with a pullback in tech stocks, despite a slight increase in Wall Street futures.
European opening performance is expected to be mixed, although lacking important data. EUROSTOXX 50 futures are down 0.2%, while FTSE futures are up 0.2%.
Powell's speech may have a significant impact on the market, or it may be overhyped. After all, his colleagues have already hinted at a rate cut in September and support a "gradual and orderly" approach.
Combined with survey results showing that the US economy is still growing healthily, the market slightly reduces the possibility of a sharp 50 basis point rate cut in September, from 38% the previous day to 24%. The possibility of a 25 basis point rate cut has already been fully priced in.
Regardless of the size of the rate cut, Democrats will be pleased to see the Fed launching an easing cycle before the November presidential election. Vice President Kamala Harris has just officially accepted the party's nomination on the last day of the Democratic National Convention.