JPY Goes Offered As Election Outcome Boosts Bets For Ramped-Up Stimulus

In defiance of forecasts based on pre-election surveys, betting markets and initial exit polls, Japan's ruling Liberal Democratic Party managed to retain a sole "absolute stable majority" in the House of Representatives. This means that the LDP will be able to dominate all standing committees in the lower house without relying on support from its junior coalition partner Komeito. The outcome of the election raised the prospect of a stable political environment and a smooth passage of fiscal stimulus measures promised by PM Kishida. The Nikkei 225 welcomed the news, while the yen headed in the opposite direction, landing at the bottom of the G10 pile.

• Some mild selling pressure hit the AUD amid speculation surrounding tomorrow's RBA monetary policy decision. AUD/USD implied volatilities kept rising across the curve, with 1-week tenor touching best levels since Mar 25.
• Spot USD/CNH stuck to a very tight range, looking through China's PMI data and a slightly softer than estimated PBOC fix. The official m'fing gauge slipped deeper into contractionary territory but the Caixin index unexpectedly improved.
• The greenback caught a bid in afternoon trade, becoming the best G10 performer. The DXY approached its one-month high printed on Friday.
• Manufacturing PMI readings abound today, dominating the global data docket. Looking further afield, it is worth noting that Wednesday's FOMC policy announcement provides the main risk event this week.