The Bank of Japan (BoJ) kept interest rates unchanged at 0.50% as expected, but surprise markets with the announcement to begin selling Exchange-Traded Funds (ETF) and Japanese Real Estate Investment Trusts (J-REIT) holdings. This move is seen as a sign of the BoJ’s commitment to its yield curve control policy, as it looks to manage long-term interest rates and maintain price stability.

European bourses are largely higher in response to the BoJ’s announcement, with the Euro Stoxx 50 up by 0.7% and the DAX gaining 0.6%. US equity futures, on the other hand, are flat, as investors await fresh news and insights from Federal Reserve officials.

The US dollar (USD) continues its winning streak, with gains against most major peers. The British pound (GBP) underperforms, however, due to disappointing borrowing data that has put added pressure on UK Chancellor Rishi Sunak. The data revealed a larger-than-expected budget deficit in July, which could impact the country’s fiscal health and influence the BoE’s monetary policy decisions.

In the bond market, US Treasuries (USTs) are marginally lower ahead of key Fed speakers, while Japanese government bonds (JGBs) see gains following the BoJ’s announcement. Gilts, on the other hand, lag behind due to concerns over UK borrowing levels.

In commodity markets, crude oil prices are under pressure, down by 0.7%, while spot gold is firmer, awaiting the upcoming meeting between US President Donald Trump and Chinese Vice Premier Xi Jinping. The Trump-Xi meeting is expected to be a pivotal event for global markets, as it could provide clarity on the future of trade relations between the two nations.

Looking ahead, investors will eye key data releases, including Canadian Retail Sales (Jul) and Quad Witching. Additionally, there are several high-profile speakers scheduled to address markets, including Federal Reserve’s Daly, Miran, and former Fed President Bullard. These events could provide valuable insights into the state of the global economy and monetary policy outlook.