EUROPEAN FISCAL: "*LESCURE: NO REASON TO REVISE FRENCH 2026 DEFICIT GOAL [...]

USD trades mildly weaker in recent trade, while US yields edge lower - both are still within the daily range, but the moves still have markets searching for news.

• Various reports are circulating that claim further success for the Yemeni government and allied forces over the Houthis and, in particular, those hostile forces occupying the Bab-el-Mandeb Strait.
• According to AA, Yemeni government forces have confirmed they have taken back the strategic area as part of ‘Operation Dawn of Yemen’, and have “successfully taken control of Bab el-Mandeb.”
• Additionally, social media sources float quotes from the leader of the Houthis in the area, who "calls for a truce, saying “no one benefits from war"", although the quote is difficult to verify.
• None of the above is particularly new news - markets already knew Saudi and Saudi-backed forces were to launch a counter-offensive as far back as Friday - but the circulation of the reports may be shifting markets on the margin here.

• USDJPY shows just through the overnight high of 158.18 on the back of the GPIF story - the piece notes that speculation had risen that the fund would reallocate funds toward domestic bonds - boosting their proportional allocation higher from current levels of 25%.
• As such, the sources report suggesting no reallocation is a repeat of March's meeting, and will come as a disappointment for markets - which is showing through via JPY weakness and through JGB futures holding close to session lows.
• Y158.45 remains the near-term target, as the pair continues to trade above the 20-day EMA, at 157.28. Key resistance lies above at 159.04, the Sep 24 high. 

"Japan’s Government Pension Investment Fund did not discuss its portfolio allocation at a board meeting held in September, according to sources familiar with the matter. The news may damp recent speculation about a portfolio review. 

Investors have been on edge over whether the $2 trillion fund may increase its allocation target for domestic bonds after a portfolio review appeared on the agenda of a board meeting held at a highly unusual time during the August summer break." - Bloomberg