A look at the day ahead in European and global markets from

Wayne Cole.

It was left to the Bank of Japan (BOJ) to end "central

banker week" by doing nothing on rates, though it did bring the

yen into sharper focus.

BOJ statements can be rather Delphic, so their latest was

mercifully brief at five paragraphs of plain prose, including

eight uses of "moderate" or "moderately" to describe the

economic background.

One notable passage was at the end, where it highlighted

financial and foreign exchange markets in a clear reference to

recent ructions in stocks and the yen.

It noted that yen movements had become more likely to affect

prices, implying a weaker currency would add more to inflation

than in the past and, presumably, that might not be welcome

anymore.

That was enough to nudge the yen a little higher to 142.30

per dollar, but it's still down large for the week. EURJPY is up

1.7% for the week and the Aussie up 2.6%, so maybe carry trades

are back on the menu.

Markets will have to wait until BOJ Governor Ueda's presser

at 3:30 p.m. (0630 GMT) to divine more on the outlook for

tightening, particularly whether the October meeting is live for

a hike.

Markets have just 3 basis points of tightening priced in for

October, though that is almost six weeks away so there's plenty

of time for things to change. Most analysts polled by Reuters

favour December for a hike of 25 basis points, though the market

still only has 7 bp in the price.

The Nikkei was largely unfazed and up 1.9% at the time of

writing, while much of Asia tracked Wall Street's overnight

rally, still basking in the Fed's outsized rate cut.

Earlier, China's central bank surprised markets by not

cutting its prime rates, then had to intervene in forex markets

to stop the yuan from rising too fast past 16-month highs.

Optimists argued the delay was so rate cuts could be

included in a big stimulus package, but there's been talk of

such a package in the works since the pandemic and none has

materalised. Others suspect the PBOC is more concerned by

falling bond yields and bank profit margins and will have to

ease reserve requirements first.

And a final word on the yield curve. For two years the

inverse curve supposedly signalled certain recession, even as

U.S. growth ran above trend.

Now its the dis-inversion of the curve that economic

orthodoxy says means a recession is inevitable, even as

consumers keep spending, weekly jobless claims hit their lowest

since May and the rather reliable Atlanta GDPNow measure points

to Q3 growth of 2.9%.

You can't have it all ways, and maybe the curve isn't

infallible.

Key developments that could influence markets on Friday:

- UK August retail sales, Canada retail sales, German

PPI, EU consumer confidence

- Speech by Catherine Mann, external member of the BoE MPC

- Conversation between ECB President Christine Lagarde and

Kristalina Georgieva, Managing Director IMF

- Federal Reserve Bank of Philadelphia President Patrick

Harker speaks

- Bank of Canada Governor Tiff Macklem gives speech