Today’s markets analysis on behalf of Konstantinos Chrysikos Head of Customer Relationship Management at Kudotrade
24th January 2025
The Japanese Yen strengthened against the U.S. dollar following the Bank of Japan’s (BoJ) widely anticipated 25-basis-point rate hike, elevating its policy rate to the highest level since 2008. The market continues to see a potential for additional rate increases while the Bank of Japan cited expectations of significant wage growth in spring 2025 and inflation increases.
Meanwhile, the U.S. dollar faced downward pressure as Trump’s tariff policies did not materialize yet, easing some inflation concerns. As a result, the Federal Reserve could adopt a less aggressive monetary policy approach. However, uncertainty surrounding U.S. policy continues to affect market sentiment and could support the greenback to a certain extent, if traders move toward safe-haven assets.
In bond markets, U.S. Treasury yields edged lower, with the 10-year note yield near the 4.6% level as investors assessed the Federal Reserve’s next steps. In contrast, Japanese bond yields move higher in response to the BoJ’s rate hike, narrowing the yield gap between the two economies. Market participants are now focusing on upcoming U.S. economic data releases, including PMI figures and consumer sentiment, which, alongside ongoing U.S. political developments, could drive further volatility in currency markets in the near term.