Europe Summary and Highlights 27 September
USD/JPY fell sharply early in the European morning, triggered by the election of Ishiba as the new LDP head and PM.
European morning session
USD/JPY fell sharply early in the European morning, triggered by the election of Ishiba as the new LDP head and PM. There had been concerns that Takaichi, who is opposed to BoJ tightening, might win the election, but the Ishiba victory keeps the BoJ on a tightening course, although Ishiba also said he will ensure Japan emerges from deflation, so will not be overpassing the tightening agenda. USD/JPY reached a high of 146.50 in late Asia on the Takaichi concerns, but fell to a low of 142.78 in Europe on the Ishiba election, bouncing modestly to settle just above 143.
EUR/USD was net not much changed near 1.1160, but did see a dip on weaker than expected French and Spanish CPI data which increased expectations of ECB October tightening and took it down to 1.1125 mid-session. Most of the other Eurozone data came in close to expectations, with German unemployment steady at 6.0% and the European Commission survey showing some further modest weakness in the business climate.
Most other pairs were not much changed on the session, but the CHF rallied with the JPY, wih EUR/CHF falling from 0.9480 to 0.9420.
Asia session
The Tokyo area September Headline CPI came in at estimate of 2.2% y/y down from 2.6% in August. Ex fresh food also tread lower from 2.4% to 2% y/y while ex fresh food and energy remain at 1.6%. It seems to suggest the strength in CPI may not be as sustainable as the BoJ sees. Japan LDP has begun the vote for leadership election. The top three candidates are former defence minister Shigeru Ishiba, ex-environment minister Shinjiro Koizumi, and economic security minister Sanae Takaichi. In the meantime, USD/JPY remains it up move to trade 0.89% higher at 146.10 with U.S. Treasury yields broadly outperforming JGB yields.
The stimulus announced by the Chinese government earlier in the week takes effect on Friday. The People's Bank of China cuts RRR by 50bp and 7 day reverse repo rate by 20bps. Regional equities in China are supported but have reversed partial gains while HSI gains strongly. The AUD/USD is however beaten by stronger USD and is trading 0.25% lower at 0.6878, NZD/USD is trading 0.4% lower at 0.6302 while USD/CAD rose 0.19%. Else, EUR/USD is down 0.11% and GBP/USD is down 0.23%.