Busy Week, Bigger Risks: 3-Minutes MLIV

Summary

Skylar Montgomery Koning previews a busy week centered on Fed and BOJ policy decisions. She argues that a Fed hold, contrary to market pricing of 8bp in hikes, would weaken the dollar, while a BOJ signal for faster tightening could jolt JGBs. Tech earnings face high expectations, and FX remains driven by terms of trade, with European gas prices still a drag on the euro.

• Fed decision: market prices 8bp hike, economists expect hold; a hold would pressure the dollar.
• BOJ: signals of faster tightening; a September hike indication could cause a big move in JGBs.
• Tech earnings: high bar persists; market questions AI spending efficiency and winners/losers.
• FX: terms of trade explain 90% of G10 moves; Europe’s gas prices remain a headwind.
• Oil and Middle East tensions ebb, contributing to short-term dollar weakness.