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EXECUTIVE SUMMARY
- FED HAWKS BACK 75 BASIS-POINT JULY HIKE, STILL SEE SOFT LANDING (BBG)
- BIDEN SET TO MEET WITH ADVISERS TO DISCUSS CUTTING CHINA TARIFFS (BBG)
- NEW UK PRIME MINISTER TO BE CHOSEN BY EARLY SEPTEMBER (FT)
- BOE'S PILL WILL CONSIDER BIGGER RATE RISES IF NEEDED (RTRS)
- FORMER JAPAN PM ABE UNCONSCIOUS AFTER SHOOTING; MAN IN CUSTODY (BBG)
Fig. 1: USD/JPY Vs. USD/JPY 1-Month Implied Vol.
Source: MNI - Market News/Bloomberg
UK
POLITICS: Conservative party grandees intend to install a new UK prime minister by early September when the House of Commons returns from its summer break, according to MPs with knowledge of the plans. (FT)
POLITICS/POLICY: Boris Johnson has told his cabinet ministers his government will not seek to implement new policies or make major changes of direction after he resigned as Conservative Party leader. (Sky)
POLITICS/ECONOMY: UK businesses have called for stability after Prime Minister Boris Johnson resigned as Conservative leader and the race to find a successor began. The CBI said the "political vacuum" needs "to be filled at speed to protect people's living standards". The Institute of Directors warned "what business hates most is uncertainty and instability". (BBC)
BOE: Bank of England chief economist Huw Pill said on Thursday that he would consider a faster pace of interest rate rises to tackle "uncomfortably high" inflation, but only if needed to stop long-term price pressures from becoming entrenched. Last month the BoE's Monetary Policy Committee said it was ready to "if necessary act forcefully" to tackle inflation that it expects to exceed 11% later this year. (RTRS)
EUROPE
GERMANY: The German government is considering providing aid of up to two billion euros ($2.03 billion) to German gas importer VNG in case of gas emergency due to falling Russian gas supplies, Handelsblatt reported on Thursday citing financial circles. VNG, which is majority-owned by German regional utility EnBW, was not immediately available for comment. The economy and finance ministries were not immediately available for comment either. (RTRS)
FRANCE: The French government's new inflation-relief package will cost 20 billion euros ($20.35 billion), but will not impact the overall public sector budget deficit, government sources said on Thursday. The cost of the much-awaited measures, which range from a civil servant pay rise to an increase in welfare benefits, will be offset by better than expected tax revenue so far this year. As a result, the deficit was still expected to be 5% of gross domestic product, unchanged from previous estimates, the sources said. (RTRS)
FRANCE: The timetable for the planned nationalisation of French power utility EDF is one of "several months", Finance Minister Bruno Le Maire said on Thursday. EDF and the French government are seeking a new boss to overhaul the power utility and build more nuclear reactors, they said on Thursday, a day after France announced it would fully nationalise the debt-laden company. (RTRS)
FRANCE: Companies which have benefited from rising energy prices, such as shipping firm CMA CGM and TotalEnergies, could still do more to help French people cope with rising inflation, said the country's finance minister Bruno Le Maire. (RTRS)
RATINGS: Potential rating reviews of note scheduled for after hours on Friday include:
- Fitch on the EFSF (current rating: AA), the ESM (current rating: AAA; Outlook Stable), & Greece (current rating: BB; Outlook Positive)
- DBRS Morningstar on the Netherlands (current rating: AAA, Stable Trend)
U.S.
FED: Two of the Federal Reserve’s most hawkish policy makers backed raising interest rates another 75 basis points this month to curb inflation, while playing down fears the US economy was headed for recession. Governor Christopher Waller and James Bullard, president of the St. Louis Fed, both stressed the need to get policy into restrictive territory to confront the hottest price pressures in 40 years, even if this meant slowing growth. Both are voting members of the Federal Open Market Committee this year. (BBG)
OTHER
GLOBAL TRADE: Senate Democratic Leader Chuck Schumer has scheduled an all-senators classified briefing on the global innovation and technology race and a proposed bill to boost U.S. semiconductor manufacturing, his office said Thursday. (RTRS)
U.S./CHINA: President Joe Biden will discuss possible reductions in US tariffs on Chinese goods in a meeting with his advisers set for Friday, according to people familiar with the matter, as his administration nears a closely-watched decision on trade with China. (BBG)
U.S./CHINA/TAIWAN: China's military recently held joint combat readiness exercises and patrols in the sea and airspace around Taiwan, the eastern command of the People's Liberation Army (PLA) said on Friday. Recent U.S. support for Taiwan's 'separatist forces' is futile and will only disturb peace in the Taiwan Strait, Colonel Shi Yi, spokesman for the eastern theater command, said in the statement published on its official social media account. (RTRS)
U.S./CANADA: The United States has agreed to lift tariffs on Canadian solar products after a trade dispute settlement panel sided with Ottawa earlier this year, Canadian Trade Minister Mary Ng and the office of U.S. Trade Representative Katherine Tai said. (RTRS)
CHINA/RUSSIA: China and Russia have maintained normal exchanges and promoted cooperation in various fields and cast aside any "interference", showing the "strong resilence" and "strategic resolve" of their relations, Chinese Foreign Minister Wang Yi said on Thursday. (RTRS)
BOJ: Bank of Japan officials are closely watching a jump in Covid-19 cases that could lead to a delay in government stimulus plans meant to help private consumption recover from earlier pandemic lockdowns, MNI understands. (MNI)
JAPAN: Former Japanese Prime Minister Shinzo Abe was unconscious and unresponsive after he was apparently shot in the chest during a political event in the western city of Nara on Friday, national broadcaster NHK and local media reports said. (BBG)
JAPAN: Japan's push to restart nuclear reactors, shut down after the Fukushima disaster a decade ago, could get a tailwind as the governing coalition looks set for gains in a national election on Sunday. Prime Minister Fumio Kishida's coalition is on track to expand its majority in the upper house of parliament, polls show, in an election where nuclear restarts have been an issue, along with inflation and defence. (RTRS)
RBNZ: The Reserve Bank of New Zealand will deliver a third successive half-point interest rate hike on Wednesday and a fourth next month in its most aggressive policy tightening on record to control soaring inflation, a Reuters poll found. A front-runner in withdrawing pandemic-era stimulus among its peers, the RBNZ will extend its hawkish stride to curb the highest inflation in three decades, at 6.9%, despite growing risks of an economic downturn. Economists have brought forward their rate hike expectations for the sixth Reuters poll in a row, and a majority, 15 of 22, now expect the official cash rate (OCR) to reach 3.50% or higher by the end of this year, broadly in line with market pricing. Over 90% of economists, 20 of 22, forecast the RBNZ will hike by 50 basis points to 2.50% at its July 13 meeting with only two saying 25 basis points. The poll was taken July 1-7. If the majority view prevails, it would mark the most aggressive monetary policy tightening since the central bank introduced the OCR in March 1999. Over 70% of respondents, 16 of 22, forecast another half-point hike at the August meeting, taking rates to 3.00%, three times where it was before the pandemic. (RTRS)
SOUTH KOREA: South Korean President Yoon Suk-yeol said on Friday the current economic conditions constituted an emergency situation and ordered his government to devise all available measures to ease the burden on people's livelihoods. "It's an emergency situation now. Please devise all available measures to counter," the situation, a media pool report provided by the presidential office quoted him as saying at the first weekly emergency meeting of economy-related officials. (RTRS)
HONG KONG: Hong Kong’s benchmark borrowing cost is set to fall this week for the first time since April, as the city’s de-facto central bank stopped draining cash from the financial system to defend its currency peg. The relief may not last. The three-month Hong Kong Interbank Offered Rate, or Hibor, has dropped 1.4% so far this week. (BBG)
HONG KONG: Hong Kong’s new health chief has rejected calls for quarantine-free travel in the near future and to live with Covid-19, even as the city relaxes some restrictions amid a surge in cases, according to an interview with local newspaper Oriental Daily. (BBG)
TURKEY/RATINGS: Potential rating reviews of note scheduled for after hours on Friday include:
- Fitch on Turkey (current rating: B+; Outlook Negative)
BRAZIL: Due to lack of a quorum, the Lower House speaker, Arthur Lira, postponed the vote on the social aid constitutional amendment bill to July 12. Discussion phase has ended. Proposal needs to be voted on in two rounds and have a qualified majority, or 308 votes in favor, to be approved. (BBG)
RUSSIA: Vladimir Putin on Thursday accused the West of decades of aggression towards Moscow and warned that if it wanted to attempt to beat Russia on the battlefield it was welcome to try, but this would bring tragedy for Ukraine. (RTRS)
SOUTH AFRICA/RATINGS: Fitch affirmed South Africa at BB-; Outlook Stable
PERU: Peru's central bank boosted borrowing costs on Thursday with a 12th consecutive hike of its key interest rate to reach 6.0%, as the bank struggles to tamp down stubbornly high inflation in the copper-producing Andean nation. The latest increase to the bank's benchmark interest rate was for 50 basis points. (RTRS)
EMERGING MARKETS: A quarter-trillion dollar pile of distressed debt is threatening to drag the developing world into a historic cascade of defaults. Sri Lanka was the first nation to stop paying its foreign bondholders this year, burdened by unwieldy food and fuel costs that stoked protests and political chaos. Russia followed in June after getting caught in a web of sanctions. Now, focus is turning to El Salvador, Ghana, Egypt, Tunisia and Pakistan — nations that Bloomberg Economics sees as vulnerable to default. (BBG)
OIL: U.S. President Joe Biden's meetings with the Gulf Cooperation Council during his Middle East trip will include bilateral talks with the Saudi king and his leadership team, including Crown Prince Mohammed bin Salman, a White House spokesman said on Thursday. (RTRS)
CHINA
FOREX: China's foreign exchange reserves declined by USD56.5 billion on month to USD3.07 trillion by end-June, as the U.S. dollar index rose sharply and global asset prices fell, Securities Times reported citing Wang Chunying, deputy head of the State Administration of Foreign Exchange. A 2.9% appreciation of the dollar index in June may have bitten USD30 billion of China’s non-dollar-denominated assets, while the decline in equity assets may exceed USD10 billion amid falling bond and stock markets globally, the newspaper said citing Wen Bin, chief economist of Minsheng Bank. FX reserves will likely keep fluctuating slightly in July, as major central banks continue to hike rates, the newspaper said citing Zheng Houcheng, director of Yingda Securities Research Institute. (MNI)
PROPERTY/CREDIT: Chinese property developers face a $13bn wall of foreign currency bond payments in the second half of this year, as a mounting default tally darkens the market outlook. (FT)
CREDIT: A sudden plunge in a single dollar bond from China Huarong Asset Management Co. has triggered confusion among investors, with speculation for the cause ranging from thin liquidity to contagion from worries about an industry peer’s financial health. The state-owned bad-debt manager’s 4.25% perpetual dollar bond fell 10.3 cents on the dollar to 74.7 cents Thursday, the biggest slump since April 2021, Bloomberg-compiled prices show. (BBG)
CORONAVIRUS: Shanghai reported more coronavirus cases, with concerns that persistent transmission fueling fears China’s financial hub may ramp up movement restrictions, while cases flared in the eastern province of Shandong. Elsewhere, Shandong province detected 66 local cases, after reporting no infections last week. Anhui reported 157, and Beijing announced no local cases. (BBG)
CORONAVIRUS: Less than two days after Beijing announced it would roll out China’s first ever vaccine mandate, authorities withdrew the policy in a rare concession to criticism from residents. (BBG)
CHINA MARKETS
PBOC NET DRAINS CNY7 BILLION VIA OMOS FRIDAY
The People's Bank of China (PBOC) injected CNY3 billion via 7-day reverse repos with the rate unchanged at 2.10% on Friday. The operation has led to a net drain of CNY7 billion after offsetting the maturity of CNY10 billion repos today, according to Wind Information.
- The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
- The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7068% at 09:33 am local time from the close of 1.5643% on Thursday.
- The CFETS-NEX money-market sentiment index closed at 45 on Thursday, flat from the close of Wednesday.
PBOC SETS YUAN CENTRAL PARITY AT 6.7098 FRI VS 6.7143
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.7098 on Friday, compared with 6.7143 set on Thursday.
OVERNIGHT DATA
JAPAN MAY HOUSEHOLD SPENDING -0.5% Y/Y; MEDIAN +2.1%; APR -1.7%
JAPAN MAY BOP CURRENT ACCOUNT BALANCE +Y128.4BN; MEDIAN +Y172.0BN; APR +Y501.1BN
JAPAN MAY BOP CURRENT ACCOUNT ADJUSTED +Y8.2BN; MEDIAN +Y154.9BN; APR +Y511.5BN
JAPAN MAY TRADE BALANCE BOP BASIS -Y1,951.2BN; MEDIAN -Y2,042.0BN; APR -Y688.4BN
JAPAN JUN BANK LENDING INCL TRUSTS +1.3% Y/Y; MAY +0.7%
JAPAN JUN BANK LENDING EX-TRUSTS +1.5% Y/Y; MEDIAN +0.8%; MAY +0.9%
JAPAN JUN ECO WATCHERS SURVEY CURRENT 52.9; MEDIAN 55.0; MAY 54.0
JAPAN JUN ECO WATCHERS SURVEY OUTLOOK 47.6; MEDIAN 53.6; MAY 52.5
NEW ZEALAND JUN ANZ TRUCKOMETER HEAVY -2.7% M/M; MAY -1.6%
Both the Light and Heavy Traffic Indexes fell in the month of June. The Heavy Traffic Index has dipped below trend, showing the economy struggling somewhat to regain momentum. We’d primarily put this down to supply-side challenges, but demand is also set to fall as the Reserve Bank’s inflation-fighting efforts kick in.That’s a story for later in the year. (ANZ)
MARKETS
SNAPSHOT: Former Japanese PM Abe Shot & Hospitalised, Questions On Future Of Japanese Policy
Below gives key levels of markets in the second half of the Asia-Pac session:
- Below gives key levels of markets in the second half of the Asia-Pac session:
- Nikkei 225 up 152.22 points at 26642.36
- ASX 200 up 37.742 points at 6685.70
- Shanghai Comp. up 5.883 points at 3370.281
- JGB 10-Yr future down 25 ticks at 149.22, yield down 0.4bp at 0.244%
- Aussie 10-Yr future down 2 ticks at 96.465, yield up 2.1bp at 3.490%
- U.S. 10-Yr future +0-09 at 118-17+, yield down 1.47bp at 2.980%
- WTI crude up $0.26 at $102.99, Gold up $0.92 at $1741.17
- USD/JPY down 56 pips at Y135.46
- FED HAWKS BACK 75 BASIS-POINT JULY HIKE, STILL SEE SOFT LANDING (BBG)
- BIDEN SET TO MEET WITH ADVISERS TO DISCUSS CUTTING CHINA TARIFFS (BBG)
- NEW UK PRIME MINISTER TO BE CHOSEN BY EARLY SEPTEMBER (FT)
- BOE'S PILL WILL CONSIDER BIGGER RATE RISES IF NEEDED (RTRS)
- FORMER JAPAN PM ABE UNCONSCIOUS AFTER SHOOTING; MAN IN CUSTODY (BBG)
US TSYS: Light Bid After Abe Shot, Little Conviction Ahead Of NFPs
TYU2 sits +0-08+ at 118-17, 0-03 off the peak of its overnight high, running on volume of ~100K within a 0-12 range. Meanwhile, cash Tsys sit 1.0-2.5bp richer across the curve at typing, with the belly leading the bid.
- Tsys have seen a light bid during the Asia-Pac session, with the shooting and subsequent hospitalisation of former Japanese PM Abe creating some light risk-off price action. Note that the more important factor for markets may be whether the incident results in the reduction of Abe’s influence within the wider Japanese policymaking sphere e.g. expediting potential changes to Japan’s defence and monetary policy stance.
- Outside of that, the space meandered through early Asia trade, with a lack of real conviction ahead of today’s NFP release (please see our full preview of that release here)
- We have noted elsewhere that the impaired market liquidity and apparent lack of conviction evident among some risk takers (as evidenced by a couple of recent sell-side surveys) could make for an interesting round of post-NFP price action. An idea that is probably compounded by the Fed’s focus on suppressing inflation even if it comes at the expense of economic growth, which limits the read-through of today’s payrolls release when it comes to wider market pricing of future Fed policy.
- On top of the NFP print Friday will bring the latest round of comments from NY Fed President Williams (permanent voter).
JGBS: Assessing Policy Implications Of The Shooting Of Abe
Afternoon trade in JGBs focused on news that PM Abe, he was hospitalised as a result and is reportedly unconscious and in cardio-respiratory arrest. Futures initially ticked lower in the wake of the news, with participants perhaps looking at the potential knock-on impact of receding Abe influence in the Japanese policymaking sphere. e.g. the potential for expedited changes to defence and monetary policies, although the contract is off of worst levels into the Tokyo bell, -36 after making fresh session lows in the Tokyo afternoon. Cash JGBs are little changed to 3bp cheaper across the curve, with 7s weaker than surrounding lines owing to the move in futures, while 20s provide the weakest point on the curve.
- There wasn’t much in the way of pre-lunch news flow to digest for the space, outside of soft household spending data.
- Note that JPX data, released late on Thursday, revealed continued short covering of the wider net short position held by foreign investors last week, albeit at a slower rate than what was observed in the previous week (similar to what we suggested on the back of the weekly international security flow data).
- Looking ahead, core machine and machine tool orders data, in addition to an address from BoJ Governor Kuroda, headline domestic matters on Monday.
JGBS AUCTION: Japanese MOF sells Y4.52894tn 3-Month Bills:
The Japanese Ministry of Finance (MOF) sells Y4.52894tn 3-Month Bills:
- Average Yield: -0.1419% (prev. -0.1339%)
- Average Price: 100.0358 (prev. 100.0334)
- High Yield: -0.1348% (prev. -0.1222%)
- Low Price: 100.0340 (prev. 100.0305)
- % Allotted At High Yield: 36.9235% (prev. 57.1428%)
- Bid/Cover: 2.845x (prev. 3.383x)
AUSSIE BONDS: Back From Cheapest Levels
ACGBs have recovered from session cheaps, with Cash ACGBs running 2.0-6.5bp cheaper across the curve, bear flattening. YM and XM are -5.5 and -3.0, respectively, after failing to meaningfully break out of their respective overnight ranges (YM did show through overnight lows, XM did not). Another push wider in EFPs suggests that swap flows helped keep the pressure on the space, even as futures moved off worst levels. Bills run 2 to 10 ticks cheaper through the reds, bear steepening.
- When it comes to the move off lows, the Aussie Bond space caught a light bid in tandem with core FI markets on the reported shooting of ex-Japanese PM Abe, with debate re: the impact of the event on Japanese policy continuity taking focus, particularly on issues of Japan’s defence and monetary policy stances.
- The latest round of ACGB Nov-24 supply went smoothly, with the weighted average yield pricing 2.45bp through prevailing mids which the cover ratio (4.6597x) came in above the 4.000x mark. Recent market stabilisation and clear demand for access to the line (as seen from the amount on loan via the RBA’s SLF) was expected to result in a smooth round of digestion for the auction.
- The AOFM issuance slate announced for next week saw little reaction in the ACGB space, with a cumulative A$1.5bn in Bonds A$2.5bn in Notes on offer.
- Looking to next week, the domestic data docket is virtually empty on Monday, with consumer confidence, business conditions, and household spending data expected to provide the first point of interest on Tuesday.
AUSSIE BONDS: The AOFM sells A$700mn of the 0.25% 21 Nov ‘24 Bond, issue #TB159:
The Australian Office of Financial Management (AOFM) sells A$700mn of the 0.25% 21 Nov ‘24 Bond, issue #TB159:
- Average Yield: 2.8008% (prev. 1.4148%)
- High Yield: 2.805% (prev. 2.0325%)
- Bid/Cover: 4.3171x (prev. 3.9900x)
- Amount allotted at highest accepted yield as percentage of amount bid at that yield: 100% (prev. 43.6%)
- Bidders 42 (prev. 30), successful 6 (prev. 8), allocated in full 6 (prev. 3)
AUSSIE BONDS: AOFM Weekly Issuance Slate
The AOFM has released its weekly issuance slate:
- On Wednesday 13 July it plans to sell A$800mn of the 1.75% 21 November 2032 Bond.
- On Thursday 14 July it plans to sell A$1.0bn of the 9 September 2022 Note, A$1.0bn of the 21 October 2022 Note, & A$500mn of the 25 November 2022 Note.
- On Friday 15 July it plans to sell A$700mn of the 4.75% 21 April 2027 Bond.
EQUITIES: Off Best Levels
Major Asia-Pac equity indices trade higher at typing but are off their respective best levels, with tailwinds from a BBG report on Thursday (re: potential support for the Chinese economy through frontloading of local government bond issuance) waning. Elsewhere, news of ex-Japanese PM Abe being shot dragged Japanese stocks from session highs after the lunch hour with defensive flows evident, seeing e-minis hit session lows, and the yen turning bid on the news.
- The Nikkei 225 trades 0.7% higher at typing, paring gains of as much as 1.5% on news of Abe’s shooting. Focus has turned to the parsing of the event’s impact re: the policy continuity (as fleshed out previously), with some debate re: the government’s stance towards monetary policy easing and PM Kishida’s stance on taxes and share buyback rules observed.
- The Hang Seng Index sits 0.1% better off at writing, operating around session lows after opening ~1.5% higher. The properties sub-gauge (+0.3%) contributed the most to gains, narrowly countering underperformance in the financials sub-index, while tech names have pared opening gains, with the Hang Seng Tech Index dealing 0.4% firmer at typing (down from +2.2% earlier).
- The ASX200 trades 0.6% firmer at typing, putting it on track for a fourth day of gains in five. Commodity-related stocks outperformed, with the energy sub-index sitting 2.6% better off, rebounding from losses in recent sessions as major crude benchmarks have stabilised.
- U.S. e-minis deal 0.3% - 0.4% worse off at typing, a touch above their respective session lows.
OIL: Range Bound In Asia; Shanghai COVID Outbreak Remains In Focus
WTI and Brent are flat to $0.20 softer apiece at writing, operating within ~$1.20 trading ranges through Asia-Pac dealing. Both benchmarks sit ~$2 off Thursday’s best levels, with worry re: developments in China’s ongoing COVID outbreak remaining in focus, adding to downward pressure on the space from a surprise build in U.S. crude inventories.
- To elaborate on the latter, U.S. EIA crude inventory data crossed on Thursday, with a relatively large, surprise build in U.S. crude stockpiles reported (8.2mn bpd). Gasoline and distillate inventories declined, while there was a minor build in Cushing hub stocks. WTI and Brent briefly hit session highs on the release before quickly falling below pre-release levels, ultimately closing ~$4 higher apiece on the day, finding support from well-documented global crude undersupply fears.
- Turning to China, fresh COVID cases have been reported in more cities/provinces in the country’s east (particularly for Shandong province, which reported 66 cases after reporting no cases last week), while Shanghai’s case count for Thursday remains relatively high (45 vs. 54 for Wed), fuelling lockdown fears (although all cases were detected “in quarantine”).
- Elsewhere, worry remains elevated re: an impending court order to halt to loadings from a Caspian Pipeline Consortium (CPC) port on the Black Sea (potential to disrupt >1mn bpd of Kazakh crude), with the CPC requesting a delay of the order over concerns of permanent damage to facilities.
GOLD: A Little Higher In Asia As Dollar Eases
Gold sits $3/oz firmer to print $1,743/oz at typing, a little shy of best levels, operating comfortably within Thursday’s range at typing. The precious metal has caught a minor bid amidst a downtick in the USD, with the DXY off worst levels, but operating below the 107.00 handle at typing.
- To recap Thursday’s price action, gold closed $1/oz higher, edging away from Wednesday’s nine-month lows, narrowly snapping a three-day streak of losses in the process. The flat performance in gold came as the DXY struggled to break through Wednesday’s 20-year highs, mixing with a limited downtick in U.S. real yields.
- Gold nonetheless remains on track for a fourth weekly decline, the longest such losing streak since mid-May, as focus remains squarely on DM central bank hawkishness, countering wider recession-related worry.
- From a technical perspective, conditions remain bearish for gold. A break of initial support at $1,753.1/oz (Dec 15 ‘21 low) was broken prior, exposing support at $1,721.7/oz (Sep 29 ‘21 low). On the other hand, resistance is seen at $1,787.0/oz (May 16 low and recent breakout level).
FOREX: Abe Shooting Inspires Rush To Safety, Yen Paces Gains
The yen turned bid and defensive flows swept across G10 FX space as Japanese media outlets reported that former PM Shinzo Abe was shot in the chest while on campaign trail in Nara. The incident raised questions over Japan's future policy trajectory, given Abe's strong influence over the ruling Liberal Democratic Party.
- The prospect of a shift in the distribution of power within the LDP reopened the debate over the sustainability of the BoJ's ultra-loose monetary policy. The Abe/Kuroda tandem was a critical driving force behind the Bank's powerful monetary easing. There was also speculation that PM Kishida could meet less resistance in pursuing his "new capitalism" reforms.
- JPY crosses went offered in the immediate reaction to the news, while USD/JPY implied volatilities climbed across the curve. Regional risk barometer AUD/JPY is ~1% off from its session highs.
- Price action across the rest of G10 FX space reflected wider aversion to risk as news from Japan diverted attention from other regional headlines/market moves. The greenback edged higher, out of sync with U.S. Tsy yields.
- U.S. NFP report provides the main point of note on today's data docket, with final U.S. wholesale inventories & Canadian jobs figures also due. Central bank speaker slate includes Fed's Williams and ECB's Lagarde, Muller, Visco & Villeroy.
FX OPTIONS: Expiries for Jul08 NY cut 1000ET (Source DTCC)
- USD/JPY: Y135.00($1.1bln)
- EUR/GBP: Gbp0.8585-00(E996mln)
- AUD/USD: $0.7100(A$2.2bln)
UP TODAY (Times GMT/Local)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 08/07/2022 | 0645/0845 | * |  | FR | Foreign Trade |
| 08/07/2022 | 0645/0845 | * | | FR | Current Account |
| 08/07/2022 | 0800/1000 | * |  | IT | Industrial Production |
| 08/07/2022 | 1155/1355 |  | EU | ECB Lagarde at Les Rencontres Economiques | |
| 08/07/2022 | 1230/0830 | *** |  | CA | Labour Force Survey |
| 08/07/2022 | 1230/0830 | *** |  | US | Employment Report |
| 08/07/2022 | 1230/0830 | ** | | US | WASDE Weekly Import/Export |
| 08/07/2022 | 1230/0830 | | US | New York Fed's John Williams | |
| 08/07/2022 | 1400/1000 | ** | | US | Wholesale Trade |
| 08/07/2022 | 1500/1100 | | US | New York Fed's John Williams | |
| 08/07/2022 | 1900/1500 | * | | US | Consumer Credit |
| 09/07/2022 | 0130/0930 | *** |  | CN | CPI |
| 09/07/2022 | 0130/0930 | *** | | CN | Producer Price Index |
| 09/07/2022 | 1330/1530 | | EU | ECB Schnabel on Green Economy |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.