JAPAN: LDP & Ishin To Continue Coalition Talks On 17th
Oct-16 08:01
The governing Liberal Democratic Party (LDP) and libertarian-federalist Japan Innovation Party (Ishin) will hold further talks on 17 Oct after leader-level discussions earlier today failed to reach an agreement on Ishin backing LDP President Sanae Takaichi to be the next PM, or on joining a governing coalition.
- Earlier today, a meeting of all Isihin lawmakers approved plans to enter coalition talks with the LDP. Ishin co-leader Fumitake Fujita says that at the discussions, Ishin submitted to the LDP 12 talking points that it wants addressed. With no comprehensive agreement reached, Fujita said that he "cannot say whether we are heading into a coalition."
- The two red lines for Ishin are the establishment of a 'second capital' to be used in case disaster strikes Tokyo (likely Ishin's political stronghold of Osaka), and social security reform, including reducing social insurance premiums for the working-age population.
- In a sign of how close the election to elect a new PM could be on 21 Oct, former PM and LDP power broker Taro Aso was reported to have asked the seven independent lawmakers that form the 'Volunteer Reform Group' in the House of Representatives to back Takaichi in the PM confirmation ballot. Mainichi reports that "The LDP is believed to be stepping up its efforts to influence minority parties", to try and ensure Takaichi's election. Should these overtures extend towards the far-right Sanseito party, it could draw blowback from potential coalition partners in the centre.
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FOREX: BBDXY Stabilises; Support In USDJPY Intact
Sep-16 07:56
- The BBDXY has stabilised just above the July 24 low of 1191.55 amid the latest pullback in European equity futures, currently -0.2% at 1192.3. While S&P500 futures have seen a less pronounced pullback than European counterparts, focus will be on US pre-market trading after Reuters reported that Nvidia’s new chip tailored for the Chinese market is being met with only lukewarm demand.
- The USD has been offered since Friday afternoon, seemingly a positioning dynamic ahead of tomorrow’s Fed decision, where the easing cycle is set to resume with a 25bp cut. The ongoing uncertainty around the Lisa Cook saga (which is now likely to go to the Supreme Court) alongside Stephen Miran’s confirmation as a Fed Governor also present ongoing dollar headwinds.
- USDJPY is -0.4% at 146.85, just off session lows of 146.70. Key short-term support to watch remains 146.21, the Aug 14 low and a bear trigger. A break of this level would highlight a stronger bearish threat and highlight a range breakout.
- Alongside broader USD softness, JPY was supported overnight by agricultural minister Koizumi’s intention to run for LDP leader. Finance Minister Kato is set to run his election campaign, providing a more hawkish (with respect to both fiscal and monetary policy) option compared to opinion poll leader Takaichi.
FED FUNDS FUTURES: FFX5/F6 Sold
Sep-16 07:40
FFX5/F6 ~4.2K sold at -24.5.
SOFR: SFRZ5 Lifted
Sep-16 07:40
Activity in the front end of the SOFR strip driven by the wider rally in core global FI markets, with SFRZ5 seeing paper pay 96.350-355 on ~23K in recent trade. SFRZ5/H6 spread lifted at the same time.
