Bank of Japan Governor Kazuo Ueda declined to comment on recent day-to-day moves in the yen, reiterating that policy decisions hinge on economic and price data rather than short-term exchange-rate fluctuations. Market pricing suggests traders see roughly an 80% chance of a 15-basis-point rate increase at the September meeting. Analysts cite strong wage gains and inflation staying above the BoJ’s 2% target as key factors behind expectations for continued gradual tightening.

Japan’s monetary base fell 15.7% year on year in August, a larger decline than the 13.5% drop expected by the market, according to Bank of Japan data. The figure points to the continued normalization of the central bank’s long-running ultra-loose policy stance. Core inflation in Japan has stayed above the BOJ’s 2% target for more than a year, pushing policymakers to reassess the costs of prolonged stimulus.

Sterling fell below 1.3550 versus the US dollar on Tuesday, down 0.4% on the day. The US dollar index rose 0.3% after February CPI increased 3.1% year-on-year, exceeding expectations. UK inflation has eased from peak levels but remains above the Bank of England’s 2% target, limiting room to cut rates. Markets are pricing a 60% chance of a 25-basis-point BoE cut in May, though that could shift if inflation stays sticky.

ECB Governing Council member Joachim Nagel said there are currently no signs of second-round effects from inflation, reinforcing expectations of further rate cuts in the euro zone. He called the inflation outlook “good news,” suggesting price growth is continuing to move back toward the ECB’s 2% target. Euro zone inflation has fallen sharply from a peak of 10.6% in October 2022, after the ECB raised rates aggressively from July 2022 and has since paused at recent meetings.

Deutsche Bank said the UK economy is losing momentum as inflation pressures intensify. Official data show quarterly growth slowed to 0.2% in the second quarter, while August CPI rose to 3.1% and core inflation remained above the Bank of England’s target. Markets are pricing in a 40% chance of a rate cut by early 2025. The bank urged caution on expectations for policy easing.

The latest data show euro zone inflation unexpectedly accelerated, marking its first jump in months and remaining well above the European Central Bank’s 2% target. Analysts at Commerzbank said the figures strengthen the case for the ECB to keep raising interest rates. The inflation surprise also adds to the complexity of the central bank’s effort to bring price growth back under control.

Eurozone inflation data came in below expectations, with headline inflation easing to 2.2% from 2.4% and core inflation slowing to 2.7% from 2.9%. The softer readings suggested price pressures are fading faster than markets had anticipated. The euro weakened against sterling, at one point falling 0.4% to around 0.84, a multi-month low, reinforcing bets that the European Central Bank could accelerate rate cuts.

The euro rose 0.15% against the U.S. dollar during Monday’s European session, trading near 1.1600 as the greenback pulled back. Germany’s preliminary CPI accelerated to 2.4% year on year and the harmonized CPI rose to 2.6%, both higher than the prior readings and above market expectations. The figures strengthened the outlook for a tighter European Central Bank policy stance.

The euro fell to a two-week low against the U.S. dollar on Tuesday as the greenback strengthened. Recent U.S. retail sales and inflation data have prompted markets to reprice Federal Reserve expectations, with traders pushing back the timing of a first rate cut. The U.S. dollar index (DXY) rose 0.4% on the day. If the Fed keeps rates high while the European Central Bank shifts toward easing, the dollar could stay firm and weigh on multinational earnings.