European FX Open - The BOJ raises its target rate to around 0.25%

USD/YEN fell to 151.64 overnight, down near 300 points at one stage, as the BOJ raised its key target rate to around 0.25% from a range of 0% to 0.1% and pledged to keep raising rates if its price outlook materialises. The Bank also said it will reduce bond purchases by Yen 400bln each quarter.

Governor Ueda still to come.

Elsewhere, main mover is a lower Aussie as Australia’s core inflation unexpectedly decelerated in Q2 to 0.8% q/q and 3.9% y/y (trimmed mean), arguably supporting the RBA’s view that prices will gradually ease and prompting traders to boost bets of no more hikes and an eventual interest rate cut.

Meanwhile, China's July composite PMI slowed to 50.2 vs 50.5 last, as factory activity contracted for a third straight month, as economic fragility remains despite some admin efforts at stimulus.

Fallout from overnight events will continue into Europe though at some point attention will turn to tonight's FOMC verdict, with expectations centring on Powell and co moving closer to lowering rates by giving some clues on a potential cut in September.

Today, a busy calendar with morning highlight the EMU CPI estimate for July, seen at 2.5% y/y. French and Italian numbers are also scheduled.

In the second half, US ADP employment change (150k?) and the Q2 employment cost index will be main focus. The latter, the Fed’s preferred wage metric, is seen at 1.0% in Q2 vs 1.2% last and a moderate slowdown in wage pressure.

Canada GDP for May is also due.

Elsewhere, US stock futures are mixed as Israel said it killed a senior Hezbollah commander with an airstrike on Beirut, in what Bbg report appeared to be a limited response to an attack in the Golan Heights that left 12 young people dead over the weekend, and BBC News writes Hamas has said its leader Ismail Haniyeh has been killed at his home in Tehran in an Israeli raid.

And, latest Bloomberg News/Morning Consult poll shows Kamala Harris has wiped out Donald Trump’s lead in seven battleground states, riding on enthusiasm among young, Black and Hispanic voters.

It's also MONTH-END amid speculation of neutral to mild USD buying flows ahead.

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