- Japanese Diet elects Shigeru Ishiba as a new PM
- US yields rebound, putting pressure on yen
Yen lost ground in Asian trade on Wednesday against a basket of major rivals, resuming the losses as investors focus on fundamental factors despite mounting haven demand due to geopolitical tensions in the Middle East.
Japan’s Diet chose Shigeru Ishiba as the new Prime Minister of the government, and he took a moderate position on monetary and financial policies.
Yen is also weighed on by higher US 10-year treasury yields before crucial US labor data later this week.
The Price
The USD/JPY pair rose 0.45% today to 144.18 yen per dollar, with a session-low at 143.42.
The yen rose 0.1% against the dollar yesterday after losing over 1% on profit-taking off two-week highs at 141.64.
Geopolitical Tensions
Israel said that Iran launched over 180 ballistic missiles at its territory, with Iran’s Revolutionary Forces saying the attack is a response to Israel’s assassination of Ismael Heniyeh and Hassan Nasrallah.
There were no reports of injuries in Israel, and it comes after a similar Iranian attack in April that didn’t leave a lasting damage or impact on the financial markets.
Israel has just begun its ground attack on southern Lebanon, with the government vowing severe punishment and retaliation for any attack on its citizens.
Shigeru Ishiba
Japan’s Diet voted for Shigeru Ishiba, the leader of the Democratic Liberal Party, as the new Prime Minister, as the country faces considerable economic challenges and increasing security risks.
After his win of the leadership bid in the governing party, Ishiba said that monetary policies should remain easy and supportive given current conditions.
US Yields
US 10-year treasury yields rose by over 0.3% away from two-week lows at 3.698%, which underpins the dollar against main rivals.
It comes ahead of important US private sector employment data, followed by the crucial US payrolls report on Friday.
According to the Fedwatch tool, the odds of a 0.5% Federal Reserve interest rate cut in November stood at 39%, with a 61% chance of a 0.25% rate cut.
US stock indices lost ground on Tuesday as October opens up after marking strong gains in both September and the third quarter.
Now markets are shifting their focus to the US presidential elections in November, and the Federal Reserve’s multiple policy meetings left this year, which could conclude with another 0.5% interest rate cut.
Investors are also keeping an eye on the union strike at the international ports in the eastern US coast and the Gulf coast, which could hinder the flow of trade in the country and lead to billions of losses.
Another item of considerable interest for the oil market is the news of an imminent missile attack by Iran against Israel, which would raise tensions in the Middle East and threaten a wider war.
On trading, Dow Jones fell 0.4% as of 15:37 GMT to 42,163, while S&P 500 fell 1% to 5704, as NASDAQ shed 1.8% to 17,870.
- Bullish remarks from Fed Chair
- Markets await more evidence on US interest rate cuts
Bitcoin fell on Tuesday for the third straight session, plumbing two-week lows after bullish remarks from Fed Chair Jerome Powell, which reduced the odds of a 0.5% interest rate cut in November.
Earlier data from crypto exchanges showed bitcoin retail activity is at normal levels.
The Price
Bitcoin fell $831, or 1.3% at Bitstamp today to $62,500, the lowest since September 22, with a session-high at $64,122.
On Monday, bitcoin lost 3.5%, the second loss in a row on profit-taking off two-month highs at $66,508.
Crypto Market Value
The market value of cryptocurrencies fell by over $20 billion to a total of $2.335 trillion, as both bitcoin and ethereum lost ground.
Powell
Federal Reserve Chair Jerome Powell took a somewhat bullish tone in a speech in Tennessee, saying the Fed will likely commit to a 0.25% interest rate cut in the future, and there’s no need to rush through the process.
US Rates
Following the remarks, and according to the Fedwatch tool, the odds of a 0.5% Fed interest rate cut in November fell to 38%, with a 62% chance of a 0.25% rate cut.
Retail Traders
Net cash inflows from regular small investors remain normal in the crypto sector even as big investors expand purchases, according to the latest data from Binance and OKX.
- Somewhat bearish remarks from ECB president
- Strong odds of October eurozone interest rate cut
Euro fell in European trade on Tuesday and extended the losses for the third straight session against the US dollar, plumbing one-week lows, under pressure from earlier data that showed slower than expected German inflation, and after bearish remarks from ECB President Christine Lagarde.
The data and remarks boosted the odds of an October 0.25% interest rate cut by the ECB.
The Price
The EUR/USD pair fell 0.3% today to $1.1100, the lowest since September 23, with a session-high at $1.1144.
The pair closed Monday down 0.2%, marking the second loss in a row on profit-taking off 14-month highs.
Euro rose 4% against the dollar in the third quarter, the first quarterly profit in three on hopes for a reduction in the US-eurozone interest rate gap.
German Inflation
Earlier German data showed consumer prices rose 1.6% y/y in September, slowing down from 1.9% in August, and the slowest reading since February 2021.
Lagarde
European Central Bank President Christine Lagarde told the European Parliament yesterday that recent developments extend confidence that inflation is returning to targets, which will reflect in the October policy decision.
European Rates
The odds of an ECB 0.25% interest rate cut in October jumped from 80% to 90% following the latest data.
Now investors await inflation data for the whole eurozone, expected up 1.8% in September, slowing down from 2.2% in August.
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