As the yen fell to near its lowest level in 40 years against the dollar, an increasing number of Wall Street institutions are betting that the Bank of Japan will accelerate interest rate hikes to curb inflation and stabilize the currency. Societe Generale, Natixis, and Barclays all believe that the persistently weak yen could prompt Bank of Japan Governor Kazuo Ueda to adopt a more hawkish monetary policy stance in the coming months.
Analysts point out that concerns over Japan's fiscal outlook, rising international oil prices, and the widening interest rate differential between the US and Japan are continuously weighing on the yen. Meanwhile, the yen's depreciation is pushing up the cost of imported goods, further intensifying domestic inflationary pressures. Societe Generale strategists Stephen Spratt and Reo Sakida stated that rising energy prices, the yen's sustained weakness, and the faster transmission of costs to consumers are becoming increasingly concerning issues for the Bank of Japan. Additionally, data released by the US government last Friday showed that the annualized number of new single-family home sales in June was 628,000 units, up 1.6% from the previous month. Economists surveyed by Bloomberg had expected the figure to be 607,000 units.
The median price of new home sales in June fell 2.7% year-over-year to $398,300. The rebound in sales may reflect that builders are continuing to ramp up promotional efforts, offering incentives and price cuts to stimulate demand in response to the current sluggish market environment. Earlier this month, a measure of builder confidence fell back to its low for the year. This week, D.R. Horton, a major US homebuilder focused on the entry-level market, lowered its sales guidance for 2026.
Recently, builders are slowing the pace of new home construction to absorb excess inventory on the market, including "spec homes"—pre-built homes that have yet to find a contracted buyer. Data to watch today includes Germany's July IFO Business Climate Index, the UK's July CBI Retail Sales, and the US June preliminary durable goods orders. Gold/dollar consolidated on Friday, with the daily chart showing a slight gain, and the current price is trading around the 4090 level. Short covering and technical buying near the 4000 mark were the main reasons supporting gold's stabilization and rebound. However, the Fed's rising expectations for interest rate hikes and the lingering Middle East tensions limited gold's upside potential. Watch for resistance near 4150 today, with support below at 4050. Dollar/yen consolidated on Friday, with the daily chart essentially flat, and the current price is trading around the 163.60 level. The Fed's rising rate hike expectations and safe-haven demand triggered by geopolitical tensions provided strong support for the pair. However, profit-taking, concerns about another possible Japanese intervention in the currency market, and Japan's better-than-expected economic data on the day weighed on the pair to some extent. Dollar/yen eventually closed flat after consolidation. Watch for resistance near 164.50 today, with support below at 162.50. Dollar/CAD consolidated on Friday, with the daily chart showing a slight gain, and the current price is trading around 1.4080. The rekindling of expectations for a Fed rate hike was the main factor supporting the pair's rise. Additionally, the decline in crude oil prices from a high level was also a key factor supporting the pair's rise. Furthermore, the weak Canadian economic data released during the session also provided some support for the pair. Watch for resistance near 1.4150 today, with support below at 1.4000.