BOJ Meeting Looms as Global Markets Eye Rate Hike

The Federal Reserve's decision to keep interest rates unchanged has shifted market attention to the Bank of Japan's (BOJ) policy meeting, which is expected to have a significant impact on global markets.

With the July FOMC meeting now behind us, investors are looking to the BOJ's move for potential catalysts. The pair USD/JPY has already seen a sharp reversal due to renewed carry trade unwind risks, falling more than 100 pips today.

The CME FedWatch Tool indicates that markets continue to price in over a 60% probability of a 25-basis-point rate hike in September, supporting the US dollar and limiting broader risk appetite. However, any indication of stronger inflation concerns or steep intervention by the BOJ could accelerate carry trade unwind risks, increasing volatility across currencies, Treasury yields, and equity markets.