FOREX: All Focus Remains on JPY Volatility, Stability Elsewhere

“SENIOR IRANIAN OFFICIAL TO REUTERS: INDIRECT NEGOTIATIONS WITH U.S. THAT STARTED ON TUESDAY NIGHT IN DOHA CONTINUE” RTRS

“SENIOR IRANIAN OFFICIAL TO REUTERS: INDIRECT NEGOTIATIONS WITH U.S. IN DOHA ARE FOCUSED ON RELEASE OF TEHRAN'S FUNDS AND STRAIT OF HORMUZ” RTRS

Progressives scored wins in Colorado’s Democratic midterm primary elections, with democratic socialist Melat Kiros ousting 15-term Representative Diana DeGette (D-CO) in Denver and state AG Phil Weiser defeating moderate Senator Michael Bennet (D-CO) in the gubernatorial primary. Manny Runnel, a progressive state rep, also defeated moderate Shannon Bird in Colorado’s tightest swing district. However, Senator John Hickenlooper (D-CO) held off a progressive challenger in the Senate primary.

• There are concerns amongst the Democratic establishment that the shift to the left, part of a broader debate on the post-Biden direction of the party, could impact Democrats’ chances of flipping the Senate in November, with a recent NYT/Siena College survey in Maine appearing to support Senate Minority Leader Chuck Schumer’s (D-NY) argument that moderate candidates could better appeal to the median voter.
• The Times notes “many voters” said progressive Maine nominee Graham Platner, a political novice facing allegations of personal misconduct, “lacks the background to be an effective senator.”
• The next tests for the left are the Michigan primaries on August 4 and the Wisconsin primaries on August 11, both swing states where left-wing populists are challenging moderates in statewide races. The Michigan Senate primary will be closely followed, as it is one of the “core four” races that Democrats must win to flip the upper chamber.   
• While Democrats are still slightly favoured to sweep Congress, a Democratic House/Republican Senate has firmed in recent weeks, with Republican prospects in the Senate improving, per Polymarket.

Figure 1: Balance of Power: 2026 Midterms

Source: Polymarket

• The EFSF's RfP suggests that there will be a transaction next week (likely Monday or Tuesday).
• The EFSF has already raised E14.0bln of its E18.0bln funding target this year, so the maximum size of the transaction would be E4.0bln.
• We pencil in a E1-3bln transaction (looking for E2.0-2.5bln as most likely), although we don't rule out a E4.0bln transaction completely. A smaller transaction than the maximum size would still leave a window for either a USD syndication (which we have pencilled in for late August / early September) or a September / October transaction.
• We don't think there are imminent needs for the EFSF to raise too large a sum now, it is more about keeping market access consistent through the year and funding at favourable times if possible.