FOREX: JPY Weakness Persists, GBP Resilience to be Tested With Jobs Print
Oct-13 16:46
- The early Monday JPY fade persisted through the London close, prompting JPY to comfortably underperform all others in G10. USD/JPY is back above 152.00, but a further rally above 152.64 will be needed to erase the sell-off triggered by Trump's threats to raise tariffs on China on Friday. Politics remains a key driver of the currency, with opposition parties set to meet tomorrow to discuss the collapse of the governing coalition last week. These meetings could help determine whether Takaichi goes ahead with a minority government, or looks to bring forward elections.
- Focus Tuesday shifts to the return in earnest for US markets and the upcoming beginning of earnings season in the US. Financials are the early focus, with most major Wall Street names set to report. 7.4% of the index are set to report between now and Friday, and this quarter’s earnings will be the first to fully reflect the signs of passthrough of tariffs, making those with high exposure to international trade a particular focus.
- Final German CPI data for September is expected to come in unrevised, while the UK jobs data and numerous MPC appearances take focus for GBP. Into the MPC speeches and the run of UK data, GBP/USD is off last week's lows, but inside the Friday range. This leaves the 1.3262 low as key support this week, a break below which exposes the 200-dma of 1.3178 and levels last seen at the beginning of August. It remains difficult to see a protracted GBP/USD sell-off absent a move in the USD however, and with an October Fed rate cut fully priced, there may be limits on how much further the greenback
can rally from here. - Lastly, AUD is stronger against the broader G10 complex, buoyed by both the stronger risk sentiment as a result of Trump's moderation in language toward China, as well as the continued surge in gold prices, which put the price through to record highs once again. The 0.6560 50-day EMA marks the next upside level, which would go further in erasing last week's sell-off. This comes after Friday's support breaks undermined a recent bullish theme, potentially signaling scope for a deeper retracement towards key support at 0.6415, the Aug 21 and 22 low.
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
Sep-12 21:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
Sep-12 21:16
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Sep-12 21:07
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
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