Japan is hopeful that inflation will remain around the 2% target for the next three years. This has set expectations of further interest rate hikes by the BOJ after its exit from the Yield Curve Control Easy policy earlier this year. Governor Ueda stated that the BOJ will raise rates if trend inflation accelerates towards the 2% target as projected. As a result, the yen depreciated sharply against the dollar, reaching multi-year lows, putting Japanese authorities in distress. Finance Minister Suzuki has also warned of strong intervention in currency markets, stating that recent trilateral meetings with U.S. and South Korea have paved the way for action against excessive yen weakness.

EQUITY

The stock market rebounded on Monday, with the S&P 500 and Nasdaq rising after a recent sell-off that saw a 6% drop from highs to lows. Investors are looking ahead to a busy week of quarterly results from major companies like Tesla, Meta, Alphabet, and Microsoft, which could be behind the recent volatility shock. The market is also awaiting the release of the PCE inflation data to gauge Fed's policy path, as more officials advocate later cuts and a seemingly indefinite pause.

GOLD

Gold prices fell on Tuesday to their lowest point in over two weeks, down nearly 1% in addition to Monday's 2.7% drop, as safe-haven demand receded due to easing worries over a potential Middle East conflict, leading to profit-taking by investors. Market focus now shifts to upcoming U.S. GDP and PCE data, which could impact the Federal Reserve's monetary policy outlook.

OIL

Crude prices restored some strength as supply concerns outweighed the diminished risks of an Iran-Israel conflict escalation, although Israel's ongoing strikes in Gaza reduced hopes of avoiding a broader regional war. However, prospects of tightening global supplies, driven by Russia's export cuts and potential U.S. sanctions on Iranian crude for Pakistan, solidify bullish sentiment.

CURRENCY

The dollar reached a fresh 34-year high against the Japanese yen, driven by recent Federal Reserve officials support for a higher-for-longer rate. Although the Bank of Japan has refrained from intervening, it is wary of going against the dollar's strength brought about by higher U.S. yields. Traders remain watchful for any signs of intervention as the dollar nears the 155 yen per dollar level, while also awaiting the Bank of Japan's policy meeting on Friday.