Diverging Central Bank Policies Spark Global Forex Shifts

The global foreign exchange market is experiencing significant shifts due to divergent central bank policies and persistent inflation.

Persistent US inflation, currently at 3.7% as measured by the PCE index, has led to a hawkish stance from the Federal Reserve, making it more likely for interest rates to increase in September 2026.

The yen's role as a global funding currency is being challenged due to aggressive Ministry of Finance intervention and Bank of Japan rate-hike expectations, which have sparked a rapid unwinding across major JPY crosses.