Headline: European FX Wrap: UK Inflation in Line as Yen Weakens; USD/JPY Breaks 156
The European forex session on 19 November saw steady price action in major currency pairs as UK inflation matched expectations and the Japanese yen extended losses. Traders nudged Bank of England rate-cut bets higher, while dollar-yen climbed on continued dovish signals from Tokyo.
UK CPI rose 3.6% year over year in October, in line with forecasts, though softer services inflation tempered sterling’s momentum. Money markets edged BoE easing expectations higher, with the probability of a December rate cut moving up to around 85% and total implied cuts through 2026 ticking up. The reaction in GBP was restrained, reflecting a market already positioned for a gradual shift toward monetary easing.
In Asia-linked moves, the yen weakened further after Japanese authorities reiterated close coordination with the Bank of Japan and a commitment to supporting wage growth and the recovery. USD/JPY rallied through the 156.00 handle, underlining persistent yield differentials. Elsewhere in Europe, the euro saw little follow-through as the eurozone’s final September CPI printed at 2.1% year over year, unchanged from the preliminary estimate.
Broader markets stayed range-bound: the US dollar index was broadly flat, US equities were off their lows, and precious metals extended gains, with gold and silver building on rebounds from key technical levels. US Treasury yields consolidated ahead of labor market data, while MBA mortgage applications fell 5.2% in the week to 14 November. Attention turns to the FOMC minutes later in the day, though any impact is likely limited given extensive recent guidance from Federal Reserve officials.
Key Points: – UK CPI rose 3.6% y/y in October, matching expectations; services inflation came in softer – BoE rate-cut bets firmed, with odds of a December move around 85% and more easing priced into 2026 – Yen weakness deepened as authorities signaled ongoing policy accommodation; USD/JPY broke above 156.00 – Eurozone final CPI for September confirmed at 2.1% y/y, in line with the flash estimate – US MBA mortgage applications fell 5.2% w/w; gold and silver extended gains as yields consolidated – FOMC minutes due later, but limited market impact is expected given prior Fed communications
