Yen Falls as BOJ Holds, Sterling Awaits BoE Decision

The yen hit a one-month low against the dollar after the Bank of Japan held rates steady and provided no new guidance on future policy. US stocks dropped sharply, with all major indices seeing their biggest daily losses in months, after the Federal Reserve signalled a slower pace of rate cuts. Meanwhile, sterling steadied ahead of the Bank of England's rate decision, with markets anticipating rates to stay on hold at 4.75%.

Equities

The FTSE 100 rose 0.1% on Wednesday, holding near a three-week low as investors weighed UK inflation data and awaited the Bank of England's rate decision. The FTSE 250 gained 0.3%, breaking a seven-session losing streak. Banks led gains, with the sector up 1.2%, while energy stocks rose 0.4% on higher crude oil prices.

AstraZeneca fell 1.5% after U.S. drugmaker Merck announced a $2 billion deal with China’s Hansoh for an oral weight-loss drug, pressuring healthcare stocks, which dropped 1%. IntegraFin Holdings fell 12.7%, reporting higher projected costs for 2025 and weaker-than-expected 2024 revenue. OSB Group lost 6.5% following a downgrade from Peel Hunt.

The Dow Jones dropped 2.58%, marking its 10th consecutive loss and closing at 42,326.87. The S&P 500 fell 2.95%, and the Nasdaq Composite declined 3.56%. These marked the largest daily declines in months, driven by disappointment over the Federal Reserve’s slower-than-expected rate-cutting plans for 2025.

Cryptocurrency-related stocks saw sharp drops after Federal Reserve Chair Jerome Powell stated the central bank has no intention of holding Bitcoin. Riot Platforms fell 14.5%, MARA Holdings declined 12.2%, and Microstrategy dropped 9.5%. Real estate and consumer discretionary sectors led losses in the S&P 500, falling 4% and 4.7%, respectively.

US Treasury yields climbed, with the 10-year note reaching 4.518%. Rising yields added pressure to equities, while the small-cap Russell 2000 index dropped 4.4%. Trading volumes across US exchanges were above the 20-day average, reflecting elevated investor activity following the Federal Reserve’s announcement.

Forex & Commodities

The US dollar strengthened, reaching a two-year high of 108.27 on the dollar index after the Federal Reserve signalled a slower pace of rate cuts in 2025. The yen fell nearly 1% to 156.30 per dollar after the Bank of Japan kept interest rates steady and provided no clear direction on future policy. Sterling remained under pressure ahead of the Bank of England's rate decision, trading near a three-week low at $1.2600, while the euro rebounded 0.42% to $1.0394 after a sharp drop the previous day.

Gold prices recovered, with spot gold rising 1.2% to $2,617.96 per ounce after hitting a one-month low earlier in the session. Gold had fallen over 2% on Wednesday after the Federal Reserve hinted at fewer rate cuts next year, boosting the dollar and bond yields. Spot silver added 0.8% to $29.59 per ounce, while platinum rose 0.9% to $927.75, and palladium advanced 1.7% to $917.86.

Oil prices fell in Asian trading. Brent crude was down 0.4% at $73.12 a barrel, and US West Texas Intermediate crude dropped 0.6% to $70.19. The declines followed the Federal Reserve's hawkish projections for 2025, which raised concerns about economic growth and oil demand. Despite these losses, US crude stocks fell by 934,000 barrels last week, and crude exports rose sharply to 4.89 million barrels per day, providing some underlying support to prices.