Morning wrap (31.10.2023)

• As widely expected, the BOJ maintained its -0.1% target for short-term interest rates and for 10-year government bond yields around the 0% set by the yield curve control (YCC).
• Japan's yield cap has turned into a kind of reference rate, and the Bank of Japan has redefined its 1% yield cap on 10-year government bonds as an "upper limit" rather than a rigid target.
• The BoJ has revised its inflation forecasts and now assumes that inflation in 2023 and 2024 will be well above the 2% target.
• Market reaction to the BoJ's decisions lifted the Japanese yen lower, with the pair losing nearly 0.76% against the US dollar and back above the 150.00 zone.
• Hamas stated that its militants in the Gaza Strip fired anti-tank missiles at Israeli invasion forces Tuesday morning. Prime Minister Benjamin Netanyahu rejected calls for a cessation of hostilities.
• U.S. and European index futures are trading lower, with the DE30 losing 0.3% and the US100 trading 0.5% lower.
• Brent gains 0.22% and US gas prices rise 0.66%.
• Asia-Pacific indices were slightly underperforming - the Nikkei gained 0.6%, the S&P/ASX 200 added 0.12%, the Kospi lost 1.4%, and the Nifty 50 traded 0.2% lower.
• The Hang Seng is leading the decline in the Chinese market, with the index losing more than 1.85%.
• China Oct PMIs: Manufacturing 49.5 (expected 50.2) Non-manufacturing 50.6 (expected 51.8)
• Cryptocurrencies are trading in mixed sentiment - Bitcoin loses 0.4%, Ripple falls 0.8%, and Solana gains nearly 4%.
• Precious metals are trading slightly lower - gold loses 0.15% and silver loses 0.75%.
• The USD and CHF are the strongest of the major currencies, while the JPY and AUD perform the weakest

Heatmap of the FX market, which illustrates the volatility on each currency pair at the moment. Source: xStation 5