Last week, France was downgraded by one notch by Moody’s and Euroyen was sold before the Tokyo market open, but the impact was limited; a 0.25% rate cut was expected at the FOMC meeting and a statement from Chairman Powell that he would slow the pace of rate cuts was observed. A shift upward from the previous dot plot was expected, and as it happened, Chairman Powell indicated a slowdown in the speed of rate cuts. However, the message was not as strong as it could have been, since no rate cut was mentioned until January.

With the BOJ policy meeting immediately following the next day, the post-FOMC move was not as significant as one might expect. The hawkish FOMC and dove-oriented BOJ policy meeting made the move easy to understand because the market was expecting the dollar to rise against the yen.

Japan is now on New Year’s vacation, but overseas markets are starting the New Year market in earnest after Christmas. While the Japanese are resting, the market will probably make a big move.