Market Outlook 30 October 2026 BOJ Holds Rates; USD/JPY Battles in the 157s, While Sterling Rises on Rate-Hike Expecta

30 October 2026

BOJ Holds Rates; USD/JPY Battles in the 157s, While Sterling Rises on Rate-Hike Expectations

Market Overview

After the Bank of Japan’s policy announcement, markets are assessing the US–Japan interest-rate differential and the outlook for further rate hikes.

The BOJ kept its policy rate at 1.25%, as expected. USD/JPY briefly fell to 157.12 in Tokyo, but recovered into the 157.70s during Governor Ueda’s press conference.

Expectations of a BOJ rate hike in December remain in place, while the current US–Japan rate differential is supporting USD/JPY. However, position adjustments ahead of the weekend and concerns about possible currency intervention are limiting the scope for a one-way move higher.

Among European currencies, EUR/USD has rebounded toward 1.1200. Sterling has strengthened on expectations of a Bank of England rate hike next week, with GBP/USD rising to around 1.3433. USD/JPY’s resilience and gains in European currencies against the dollar are occurring at the same time, so this is not a broad-based dollar rally.

BOJ Policy Decision

The BOJ held its policy rate steady, but judged that underlying inflation had reached around 2%. This is the first time it has made that assessment since introducing its inflation target in 2013. Board member Takata also proposed raising the rate to around 1.5%.

The decision to hold rates does not, by itself, suggest that the BOJ has become less willing to raise them further. Markets are likely to continue focusing on the possibility of a December hike.

However, currencies respond not just to the possibility of a rate hike, but to whether it exceeds what markets have already priced in. If a further hike falls within expectations, yen buying may not last, leaving USD/JPY vulnerable to a recovery supported by the interest-rate differential.

A key test for the persistence of yen strength will be whether rising Japanese government bond yields accompany stronger rate-hike expectations.

USD/JPY

USD/JPY is seeing dip-buying and selling on rallies as it trades around the 157 level.

The first support level is 157.00. The lower Bollinger Band is also near this area. If the pair breaks below it, the next levels to watch are the 26 October low at 156.65 and then the 23 October low at 156.08.

To the upside, the focus is on whether the pair can recover and hold above the 10-day moving average near 157.68 and the 21-day moving average around 157.92. The 200-day moving average near 158.55 is the next level above.

The recovery into the 157.70s during the press conference points to buying demand at lower levels, but it remains to be seen whether the pair can establish itself in the upper 157s. If the rebound fails to continue, USD/JPY could test the 157 area again.

If US yields rise and the pair breaks clearly above 157.90, a recovery into the 158s is possible. However, concern about official warnings against yen weakness and possible intervention is likely to remain a headwind during any rally.

US Economic Data and Fed Speakers

Tonight’s focus is on US data related to wages and economic activity. All release times below are in London time.

• 12:30: Third-quarter Employment Cost Index

• 13:45: October Chicago PMI

The Employment Cost Index is expected to rise 0.8% quarter on quarter, down from 0.9% previously. Labour costs affect service prices, making this an important indicator for the Fed’s inflation assessment.

A stronger-than-expected reading could reinforce concerns about persistent wage-driven inflation, lifting US yields and supporting the dollar. A larger-than-expected slowdown could ease concerns about further rate hikes and limit a recovery in USD/JPY.

The Chicago PMI is forecast at 56.3, down from 58.8. If the result matches expectations, the index would remain above 50, indicating expansion. A much weaker reading could intensify concerns about an economic slowdown.

Richmond Fed President Barkin, San Francisco Fed President Daly and St. Louis Fed President Musalem are also scheduled to speak. If US yields move after the data, watch whether their comments reinforce that move.

Euro

EUR/USD rebounded in London from the 1.1170s to around 1.1200.

The ECB held rates steady at yesterday’s meeting. The euro initially fell as expectations for a rate hike receded, but recovered after President Lagarde’s press conference highlighted upside inflation risks and confirmed that a rate hike had been discussed.

Markets continue to consider the possibility of a rate hike in December. However, higher oil prices could weigh on economic activity, so rate-hike expectations alone may not be enough to sustain euro gains.

Germany’s preliminary CPI for October is due at 13:00 London time and is expected to slow to 2.9% year on year from 3.3%. An upside surprise could support the euro, while a softer result could encourage selling on rallies around 1.1200.

Pound

Sterling is one of the stronger currencies today.

GBP/USD rose to around 1.3433, its highest level since 16 September. EUR/GBP also briefly fell to around 0.8336, showing that sterling is benefiting not only from a recovery against the dollar but also from currency-specific buying.

The move is supported by expectations that the Bank of England will raise rates by 0.25% at next week’s meeting. The UK Autumn Budget also provided some support after passing without major disruption.

The immediate focus is whether GBP/USD can hold above 1.3400. However, as the pair has already risen in anticipation of a rate hike, be alert to profit-taking ahead of the weekend and to stronger-than-expected US data.

For GBP/JPY, consider both the strength of GBP/USD and the direction of USD/JPY. Sterling may rise against the dollar, but renewed yen buying could still cap GBP/JPY.

Equities, Oil and Middle East Developments

In the previous US session, selling in AI-related shares coincided with lower Treasury yields and oil prices, weighing on USD/JPY. At the same time, some yen crosses moved lower, so the market was not seeing a broad-based shift into the yen as a safe haven.

Today, do not infer USD/JPY’s direction from equity weakness alone. Assess Treasury yields and other currency pairs as well.

If oil prices and US yields both fall, dollar selling could put further pressure on USD/JPY. Conversely, an escalation in the Middle East that sends oil higher could revive inflation concerns and safe-haven demand for the dollar.

With the weekend approaching, remain alert to sudden moves triggered by Middle East headlines.

Key Points for the Global Session

• Whether USD/JPY can hold 157.00

• Whether the pair can recover and hold above the moving averages around 157.68–157.92

• Whether the US Employment Cost Index exceeds the 0.8% quarter-on-quarter forecast

• Whether the Chicago PMI and Fed speakers move US yields

• Whether EUR/USD can establish itself around 1.1200 after Germany’s CPI release

• Whether GBP/USD can hold above 1.3400

• Whether equities, oil and Middle East developments affect position adjustments ahead of the weekend

Scenarios

The base case is for USD/JPY to trade around the 157 level as support from the US–Japan rate differential offsets expectations of further BOJ rate hikes and intervention risk.

If the Employment Cost Index is weak and US yields fall, USD/JPY could break below 157.00 and test around 156.65. Stronger expectations for a BOJ rate hike could add to yen buying.

Conversely, strong US data and rising yields could help the pair recover from the upper 157s into the 158s. Even then, watch carefully for signs that the rebound is losing momentum as weekend profit-taking and intervention concerns could limit further gains.

Summary

The BOJ held rates steady, but its assessment of inflation keeps the possibility of further rate hikes in focus. At the same time, the current interest-rate differential continues to attract buyers at lower levels in USD/JPY.

The next focus is the US Employment Cost Index and the reaction in Treasury yields. The market will be watching whether USD/JPY holds 157.00 or extends its recovery into the upper 157s. Sterling is strong on its own rate-hike expectations, so currency-specific drivers remain important.