■ JPY endures volatile week amid speculation on policymakers’ action

■ Bank of Japan’s rate announcement fails to meet high expectations

■ U.S. Q2 GDP data surprises to the downside with +1.2% gain and downward revised Q1 print

■ JPY ends week with substantial strengthening following lackluster BoJ, U.S. GDP

■ Weak equity performance and gains in gold prices suggest end of risk-on rally

■ U.S. 10 year hits 1.4480%

The Japanese Yen ended a fairly volatile weekly session with a substantial strengthening. Concluding trade at a level of 102.06 marked the strongest level for the JPY vs. the USD since the beginning of the month, it also meant that the Yen has pretty much recovered from a slew of expectations as to how decision makers would implement the next tsunami of helicopter Yens. The JPY is now appreciated by about 5% vs. the Dollar compared to when these levels peaked, a little more than a week ago.

Evidently, while USDJPY was unimpressed by the fiscal stimulus introduced by Japan’s Prime Minister Abe, the following day’s rate announcement by the Bank of Japan worked in the opposite direction seeing the pair lose about 2% at the start of Friday’s session. While Kuroda did introduce additional monetary measures, such as expanding the purchases of ETFs to JPY 6 T and doubling the bank’s USD lending program, to USD 24 B, after the move by Abe, expectations from the BoJ were running a bit high. Further support for the JPY was provided by the fact that the Bank of Japan maintained both its policy rate at its -0.1%, as well as its monetary base target at Yen 80 T.

The rest of the day saw the currency pair lose another 1.6%, but it was mostly the weakening of the Dollar itself, due to lackluster advance second quarter’s U.S. estimate for Gross Domestic Product. Headline data included a 1.5% Quarter over quarter increase of U.S. GDP, well below expectations for +2.5%. Additionally, the fairly weak 1.1% advance published previously for the first quarter being was revised downwards, to +0.8%.

Risk-off makes a comeback?

Market dynamics, evidently, did not sum to a stronger JPY, but rather extended to a dissolving of recent weeks’ risk-on sentiment. Gold, namely, has had a fairly encouraging session, adding no less than 2.16% weekly, the best week for nearly two months. Concluding at 1,351.28 per oz. also meant the highest level for the metal since July 12th.  The S&P 500, additionally, has spent the most of the weekly session at lower levels compared to the previous week’s close. Concluding with a 0.07% decline, which also meant the first negative weekly session after four green ones. Things did look somewhat better for equity with modest gains recorded at major indices. Eurozone investors also benefitted from the EUR adding 1.8% vs. the USD and 0.8% vs. the GBP.

The week also had to meddle with a rate announcement by the Fed. The central bank chose to adopt a somewhat hawkish approach, stating that near-term risks to economic outlook have diminished, that the job market has strengthened and that the economy is expanding at a moderate pace. Although the announcement was perceived somewhat of a non-even, as a rate hike is definitely off the table ever since the Brexit vote, a market response was noted with a small uptick in U.S. yields, though they were short lived. Friday’s weak GDP data, on the other hand, has helped the U.S. 10 year dip to as low as 1.4480%, its lowest for nearly three weeks.