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On Tuesday XAU/USD hit an intraday low of $3,989, reversed and gained more than 1%, rising to $4,061. The rally occurred despite a stronger dollar and rising US Treasury yields.
Japanese Finance Minister Satsuki Katayama said on Tuesday, October 27, that the government is ready for decisive action in the currency market. This is a direct hint at intervention - selling dollars from reserves to support the yen.
WTI crude (the U.S. benchmark grade, with futures traded on the NYMEX exchange) slipped on Monday from its peak level of $103.28 - a five-month high - to around $100.51. The market paused ahead of a week with three central bank meetings at once.
On Monday, October 26, the dollar strengthened against major currencies ahead of the Fed meeting on Wednesday. The yen is the weakest in the basket, the pound slipped from its recent peak of 1.3419 to levels below 1.3350.
From October 28 to 30, four central banks issue rate decisions, and on the 29th US GDP and PCE come out at the same time. The market has already priced in rates staying unchanged, so it will be the wording, not the numbers themselves, that moves the instruments.
September consumer price data was released at 02:30 Moscow time and came in above August levels across all measures. The yen strengthened, and the market is once again betting on a Bank of Japan rate hike in December.
XAU/USD touched a fresh weekly low: on Tuesday gold closed at $4,122 (-0.43%), and in the Asian session on Wednesday it traded around $4,115 (-0.2%). This is the fourth consecutive day of decline, all because the market expects the Fed to raise rates rather than cut them.
On Friday morning, three signals at once from the Bank of Japan in favor of a further rate hike supported the yen, and the USD/JPY pair slid to 157.85. The regulator's next meeting is on October 29-30.
At the Bank of Japan, they are leaning toward leaving the rate unchanged at the October 30 meeting. Against this backdrop, the probability of an October hike has fallen to about 10%, and USD/JPY is holding near 158.50, close to monthly highs.
September Tokyo inflation came in above forecast across all key measures. Core CPI accelerated to 2.7%, while the measure excluding food and energy reached 3.0%. The yen responded with strengthening, and USD/JPY dropped below 158.00.
USD/JPY rose to 158.44, and the yen lost about 0.5% after the release of the Bank of Japan's summary of opinions. The market saw no signal in the document for a rate hike as early as October, and the absence of currency interventions further increased pressure on the yen.
