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The Bank of England raised rates by 50bps to 4%, its tenth consecutive hike and its highest since October 2008. However, The pound dropped and UK bonds extended gains on speculation the Bank of England is nearing the end of its hiking cycle, as the BOE dropped its guidance that it would respond “forcefully” if necessary, even as it highlighted risks to the inflation outlook. 

This morning, we had news that the Bank of Japan is not considering yet changing the yield-curve control policy. Japanese stock rose, and the yen tumbled 2% but it is seeing some recovery. We will be watching the USDJPY for a reversal in the trend. the support levels displayed in the chart are key levels to watch for. 

The Japanese yen strengthened against major peers after news that the BOJ is set to direct efforts toward reducing the negative impacts of the bank's ultra-accommodative policy. In December, the BoJ modified its yield curve control policy, allowing the 10y bond yield to increase from 0.25% to 0.50%. More weakness could be ahead, in particular, if inflation misses estimates.

European natural gas prices have tumbled since their highs of Summer 2022. December 2023 futures contracts are down 45% from early December 2022. This is encouraging for the battle against inflation. It is positive for European growth perspectives, increasing the odds of a stronger euro and resilient European stocks and bonds.

The main central banks in the world are expected to end 2022 with additional rate increases as they continue to fight against inflation. The US Federal Reserve will meet on Wednesday, followed by the European Central Bank, the BoE, and Switzerland's SNB on Thursday. On Tuesday, US inflation statistics will provide us with new insights into the Fed's strategy. The Fed meeting and the inflation statistics come as a double punch and could determine the direction of US stocks for the remainder of the year and beyond. Lastly, analysts will be closely following earnings from cloud software giants Oracle (Monday) and Adobe (Thursday), expected to be released after the bell.