The Japanese yen experienced a slight rebound early today after traders reacted to geopolitical developments in the Middle East before returning near its recent lows as tensions abated to a certain extent.

Traders now await further indications following remarks from Bank of Japan Governor Kazuo Ueda, who recently suggested that the central bank (BOJ) might consider raising interest rates if the yen’s weakness persists and leads to sustained price hikes due to increased import costs.

The BOJ’s upcoming quarterly growth and price projections, set to be unveiled at its next policy meeting, will shed light on how the yen’s depreciation has impacted the economy.

Japan’s annual inflation rate went down to 2.7% in March from February’s 2.8%. However, inflationary pressures remain present globally, prompting central banks around the world to reassess their policy stances.

The previously expected rate cuts by the Federal Reserve are now uncertain. As a result, US treasuries yields could continue to rise. Concerns about currency depreciation have prompted Japan’s finance minister to engage in discussions with counterparts from the US and South Korea, with the G7 expected to address FX volatility.

The Japanese currency faces ongoing pressure from a strengthening dollar, complicating the country’s monetary policy decisions. Focus now turns to next week’s PMI data, where softer data could weaken the yen although risks of intervention remain.

Source: <a href="https://londonlovesbusiness.com/japans-inflation-eases-to-2-7-as-risks-remain/" target="_blank"> London Loves Business </a>

(Alliance News) - Stock prices in Europe pushed higher on the eve of the Federal Reserve decision, while technology shares in New York rose again as a cooler inflation reading all but ensured US interest rates will not be hiked this week.

Elsewhere among central banks, eyes were also on the Bank of England after red-hot UK jobs data. Governor Andrew Bailey, meanwhile, said inflation will come down, though at a slower pace than expected.

European benchmarks got a boost from mining and luxury retail shares on hopes of China stimulus.

The FTSE 100 index rose 24.09 points, 0.3%, at 7,594.78. The FTSE 250, however, slipped 2.31 points to 19,188.50, though the AIM All-Share added 2.24 points, 0.3%, to 794.72.

The Cboe UK 100 closed up 0.4% at 757.78, the Cboe UK 250 lost 0.1% to 16,714.76, and the Cboe Small Companies rose 0.2% to 13,895.43.

In European equities on Tuesday, the CAC 40 index in Paris added 0.6%, while the DAX 40 in Frankfurt rose 0.8%.

Stocks in New York were on the up at the time of the European close. The Dow Jones Industrial Average was up 0.5%, the S&P 500 added 0.7% and the tech-heavy Nasdaq Composite climbed 0.8%.

"*Despite some remaining concerns, technology stocks were driving the market and could continue to push it to the upside. The sector has been seeing strong earnings, with many companies beating estimates. Oracle reaffirmed this trend on Monday as investors could look forward to future positive results*," DHF Capital analyst Ralph Ratterman commented.

Oracle's stock was 2.1% higher in New York.

Ahead of Tuesday's US inflation data, the debate was whether the Fed would hike or hold on Wednesday. A tamer US inflation reading put a pause by the Federal Reserve beyond all reasonable doubt.

Markets currently see a 94% chance that the US central bank will hold rates steady on Wednesday, according to the CME FedWatch Tool. That belief was strengthened after Tuesday's US inflation reading. A day earlier, the likelihood of a pause stood at 79%, according to the tool.

The Fed announces its latest interest rate decision at 1900 BST on Wednesday. A press conference with Chair Jerome Powell follows at 1930 BST.

According to the Bureau of Labor Statistics said the US annual inflation rate eased to 4.0% last month, from 4.9% in April. The figure for May came in shy of FXStreet cited consensus, which had predicted an inflation rate of 4.1%.

Core inflation eased and landed in line with expectations, though it remains markedly high, giving something for the hawks to hang onto.

Core yearly inflation, which excludes food and energy, eased to 5.3% in May, as expected, from 5.5% in April.

"*Core inflation remains uncomfortably high for the Fed,*" analysts at Capital Economics commented.

"*With broader measures showing labour market conditions easing and wage growth slowing, we do anticipate the non-housing core services inflation will slow, but it is still far too high for the Fed’s comfort. With employment growth still robust too, we expect a final 25bp rate hike from the Fed next month*."

The pound was quoted at USD1.2609 at the time of the London equities close on Tuesday, up sharply from USD1.2511 on Monday. The euro stood at USD1.0795, up from USD1.0754. Against the yen, the dollar was trading at JPY140.05, higher compared to JPY139.54.

The Bank of England announces an interest rate decision next week Thursday, but UK data put Threadneedle Street under the spotlight on Tuesday.

With another robust set of UK jobless data earlier on Tuesday, there is every chance the Bank of England is not done with its rate hikes yet.

The UK unemployment rate edged downward in the three months to April, while pay growth picked up.

Unemployment edged down to 3.8% in the three months to April from 3.9% in the three months to March. Market consensus, as cited by FXStreet, had expected unemployment to rise to 4.0%.

In the three months to April, annual growth in average total pay, including bonuses, picked up to 6.5% from 6.1% in the three months to March. This came above market consensus, which expected pay growth to hold steady.

Excluding bonuses, annual average earnings growth was 7.2% in the three months to April, compared to 6.8% in the previous three months. This was above expectations of 6.9% growth.

BoE Governor Bailey, testifying in front of the House of Lords in London, said inflation will come down, but at a slower pace than expected.

The expectation of more rate hikes hurt housebuilding shares. Persimmon was among the worst of the lot, losing 4.2%.

Bellway fell 3.4%. The housebuilder reported a "sustained improvement in sales demand" during the spring selling season, compared with tougher trading conditions in the last three months of the 2022 calendar year.

From February 1 to June 4, Bellway said its overall reservation rate decreased by 25% to an average of 190 per week from 253 per week for the same period a year before. The reservation rate in the whole of first half ended January 31 was 32% lower year-on-year at 138 per week.

Housebuilders may come under pressure as mortgage rates continue to rise, according to a Rightmove tracker.

In the key five-year fixed term mortgages, with an 85% loan-to-value, the rate ticked up to 5.20% on June 13 from 5.02% a week prior. For five-year fixed term mortgages with a 60% loan-to-value, the average rate moved to 4.90% from 4.68%.

A year ago, those mortgage rates stood at 3.08% and 2.77%, respectively.

Mining shares ended higher on the hope of stimulus measures in China. China is a major customer of mining output. Glencore shares rose 4.9%, Antofagasta added 3.5% and Rio Tinto climbed 2.9%.

China is considering a package of stimulus measures to boost growth, Bloomberg reported, citing people familiar with the matter.

Possible measures include support areas including real estate. More interest rate cuts are also being considered, Bloomberg reported.

Luxury retail in Paris was also supported. LVMH added 1.2% and Kering rose 1.3%. Chinese consumers are major buyers of luxury goods.

Back in London, Harland & Wolff added 9.2%. The infrastructure firm, known for its 81-acre shipyard in Belfast, will team with Macduff Shipyards, Kongsberg Maritime and Echandia to create a UK consortium. The firms will look to develop and build a zero emissions harbour and coastal tug.

"*As part of our ongoing commitment to fully embrace the UK National Shipbuilding Office's aims and in our drive to net zero, we are pleased to have put together this consortium. Not only are these the first vessels of this type to be designed and constructed in the UK, but they also provide firm foundations for the build of various vessels requiring this type of technology in the future. We are delighted by the initial feedback that we have received from potential clients and look forward to seeing these vessels come to life in our shipyards*," H&W Chief Executive John Wood said.

Brent oil was quoted at USD73.98 a barrel late Tuesday in London, up from USD72.71 late Monday. Gold was quoted at USD1,944.33 an ounce, lower against USD1,957.18.

Prior to Wednesday's Fed decision, there is a UK gross domestic product reading at 0700 BST, before eurozone industrial production data at 1000 BST.

In the UK corporate diary, electrical products retailer Marks Electrical and automotive dealer Motorpoint Group release annual results.

Sources: [London South East](https://www.lse.co.uk/news/london-market-close-us-inflation-ebb-china-stimulus-hope-lift-stocks-jijj51ma9wtkkip.html)
[Morningstar](https://www.morningstar.co.uk/uk/news/AN_1686672131289784900/london-market-close-us-inflation-ebb-china-stimulus-hope-lift-stocks.aspx)
[Shares](https://www.sharesmagazine.co.uk/news/shares/stock-markets-buoyed-by-cooler-us-inflation-and-likely-fed-pause)
[shareprices.com](https://shareprices.com/news/london-market-close-us-inflation-ebb-china-stimulus-hope-lift-stocks-jijj51ma9wtkkip/)
[AJ Bell](https://www.ajbell.co.uk/articles/latestnews/261486/london-market-close-us-inflation-ease-sets-stage-fed-pause)

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LONDON MARKET CLOSE: US inflation ebb, China stimulus hope lift stocks

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The dollar recorded some volatility today but could remain within its downtrend overall while traders expect the start of interest rate cuts in March despite several Fed members attempting to temper market optimism. The dollar could follow treasury yields in their decline. Traders could remain cautious however ahead of the release of GDP and PCE data in the next two days. 

The British Pound declined today following an unexpected drop in inflation levels. The data fueled speculations that the Bank of England could start cutting rates earlier than previously expected. The change in expectations could weigh on the currency and could weigh on its rebound.

The Japanese yen could continue to see some downside risks after the Bank of Japan maintained its rates unchanged. Expectations of a more restrictive monetary policy remained unanswered and could leave the currency with less support after accumulating gains against the dollar for the last couple of weeks.

Source: <a href="https://londonlovesbusiness.com/forex-market-awaits-gdp-and-pce-data-as-pound-and-yen-under-pressure/" target="_blank"> London Loves Business </a>