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FOREX: JPY Shoots Higher on Ishiba Victory, EUR Slips on Inflation

FOREX
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  • JPY gained sharply on the back of Ishiba's victory in the race for the leadership of the LDP, and de-facto Prime Minister of Japan. USD/JPY's 300 pip slippage reflects the concern priced into markets that the rival, Takaichi, could take the top spot, and usher in stronger critiques of BoJ rate hikes and a preference for a weaker currency.
  • The reversal lower for USD/JPY confirms the rejection of resistance that coincided with the Y146.20 50-dma as well as the uptrendline drawn off the August 5th low (146.27 today). This could heighten the importance of the Friday high at 146.49 on any rallies ahead.
  • EUR is the poorest performer ahead of the NY crossover, with soft French and Spanish inflation prints setting markets up for a lower-than-forecast outcome at Tuesday's Eurozone CPI Estimate. The implications for the ECB are real - markets had solidly assumed a pace of quarterly rate cuts from the ECB, but these inflation prints have bolstered calls for further action as soon as the October meeting. This speculation has driven EUR/GBP back toward recent pullback lows and major support at 0.8317 - the late Sept low.
  • Canada's GDP print for July and US personal income/spending, PCE price index data for August are the calendar highlights Friday, as well as the final UMich sentiment print. The central bank speaker schedule is topped by ECB's Nagel, Cipollone and Fed's Collins, Kugler and Bowman.
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  • JPY gained sharply on the back of Ishiba's victory in the race for the leadership of the LDP, and de-facto Prime Minister of Japan. USD/JPY's 300 pip slippage reflects the concern priced into markets that the rival, Takaichi, could take the top spot, and usher in stronger critiques of BoJ rate hikes and a preference for a weaker currency.
  • The reversal lower for USD/JPY confirms the rejection of resistance that coincided with the Y146.20 50-dma as well as the uptrendline drawn off the August 5th low (146.27 today). This could heighten the importance of the Friday high at 146.49 on any rallies ahead.
  • EUR is the poorest performer ahead of the NY crossover, with soft French and Spanish inflation prints setting markets up for a lower-than-forecast outcome at Tuesday's Eurozone CPI Estimate. The implications for the ECB are real - markets had solidly assumed a pace of quarterly rate cuts from the ECB, but these inflation prints have bolstered calls for further action as soon as the October meeting. This speculation has driven EUR/GBP back toward recent pullback lows and major support at 0.8317 - the late Sept low.
  • Canada's GDP print for July and US personal income/spending, PCE price index data for August are the calendar highlights Friday, as well as the final UMich sentiment print. The central bank speaker schedule is topped by ECB's Nagel, Cipollone and Fed's Collins, Kugler and Bowman.