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FOREX: JPY Slips Again as Election Implications Weigh

FOREX
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  • USD/JPY gapped higher on the resumption of trade after the weekend, and remains the weakest performer in G10 - touching 153.88 and a new multi-month high overnight, marking a >10% rally off the mid-Sept lows. This opens 155.27 as the next major resistance. Moves triggered by the surprise weekend election results, in which Ishiba's LDP-led coalition lost their majority in parliament for the first time in 15 years - a result that's brought considerable uncertainty to Japanese politics.
  • Markets now anticipate a greater likelihood of a near-term additional budget to shore up local confidence, and partly because it raises questions over Ishiba's future role, raising the risk of another leadership contest after
    the Ishiba - Takaichi run in September prompted further market volatility.
  • The EUR trades well, firmer against most others in G10 as the single currency reverses a very small part of recent losses. EUR/USD remains below the Friday highs, but has opened a ~50 pip buffer with the recent pullback low.
  • Focus for GBP rests on the Budget due on Wednesday. UK PM Starmer continues to prep for tax raises targeting those with "broader shoulders", while looking to avoid raising the tax burden on working people. Our full Budget preview is found here: https://mni.marketnews.com/3YBr39n
  • The Monday schedule is typically light, with no notable data releases and the Fed inside their pre-meeting media blackout - which should reduce headline risk. ECB's de Guindos is set to speak, however not until after the European market close.
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  • USD/JPY gapped higher on the resumption of trade after the weekend, and remains the weakest performer in G10 - touching 153.88 and a new multi-month high overnight, marking a >10% rally off the mid-Sept lows. This opens 155.27 as the next major resistance. Moves triggered by the surprise weekend election results, in which Ishiba's LDP-led coalition lost their majority in parliament for the first time in 15 years - a result that's brought considerable uncertainty to Japanese politics.
  • Markets now anticipate a greater likelihood of a near-term additional budget to shore up local confidence, and partly because it raises questions over Ishiba's future role, raising the risk of another leadership contest after
    the Ishiba - Takaichi run in September prompted further market volatility.
  • The EUR trades well, firmer against most others in G10 as the single currency reverses a very small part of recent losses. EUR/USD remains below the Friday highs, but has opened a ~50 pip buffer with the recent pullback low.
  • Focus for GBP rests on the Budget due on Wednesday. UK PM Starmer continues to prep for tax raises targeting those with "broader shoulders", while looking to avoid raising the tax burden on working people. Our full Budget preview is found here: https://mni.marketnews.com/3YBr39n
  • The Monday schedule is typically light, with no notable data releases and the Fed inside their pre-meeting media blackout - which should reduce headline risk. ECB's de Guindos is set to speak, however not until after the European market close.