The US CPI report is released tonight, and Japan is likely to raise interest rates tomorrow! Has the market already calculated the outcome?
Two major events are set to unfold tonight and tomorrow morning: the US CPI data will be announced tonight, and the Bank of Japan is highly likely to raise interest rates to a new 30-year high tomorrow. From the news perspective, there are signs of tension, but in reality, the market may have already 'laid flat'.
1: Japan's Interest Rate Hike
The market has been anticipating this for half a year, with discussions starting back in early this year, and the exchange rate has also reacted in advance, with media surveys predicting a unanimous expectation for a rate hike. In simple terms, a 0.25% increase, if there are no surprises, will essentially be a 'shoe dropping', with limited actual impact.
2: US CPI
The real variable lies in the US. Tonight's CPI data is like 'opening a blind box', but the core logic remains unchanged: as long as the data isn't explosive, the market will continue to speculate that 'the Fed will eventually cut rates'. Currently, oil prices and the job market are stable, and inflation is likely to remain the same.
3: Market Reaction
The real play in the market might be: using news to shake off positions, completing a long-short swap at critical levels. Don't be scared by the news; Japan's rate hike is a clear signal, while the US CPI is an old topic. The market will likely use this 'known fear' to create opportunities.
Do you think this time it will be 'bad news fully priced in leading to a rally', or 'two heavy hits creating a deep pit'?
