MNI EUROPEAN OPEN: USD/JPY Up As Takaichi Confirmed As New PM

EXECUTIVE SUMMARY

• LINGERING INFLATION UNEASE TEMPERS FED EASING PUSH - MNI POLICY 
• HARDLINE TAKAICHI TO SHATTER JAPAN'S GLASS CEILING AND PIVOT TO RIGHT - RTRS
• JAPAN SET TO HAVE FIRST FEMALE FINANCE MINISTER, REPORTS SAY - BBG
• ADVISORS SHARE THEIR OUTLOOK FOR MONETARY POLICY AHEAD OF THE 5yr PLAN - MNI 
• MNI BOK WATCH: BOARD LIKELY TO HOLD, NOV RATE CUT EYED

Fig 1:  USD/JPY & 1 month USD/JPY Risk Reversal 

Source: MNI - Market News/Bloomberg/Refinitiv. 

UK 

FISCAL (MNI BRIEF): Deregulation will save UK businesses nearly GBP6 billion per year in "pointless" administrative costs by the end of the Parliament, Chancellor of the Exchequer Rachel Reeves will announce on Tuesday.

POLITICS (TIMES): “The economic damage caused by the last government’s deal has had a much more significant impact than previously anticipated, the chancellor will say.”

UKRAINE (BBC): “Defence Secretary John Healey has said European troops are "ready to deploy" to Ukraine in the coming weeks if Donald Trump and Vladimir Putin agree on a ceasefire.”

EU

GREEN TRANSITION (MNI): European leaders will signal a more pragmatic approach on the green transition in order to mute its impact on industrial competitiveness when they meet in Brussels later this week, draft summit conclusions show.

UKRAINE (BBC): “Ukrainian President Volodymyr Zelensky has said he would be ready to join Donald Trump and Vladimir Putin at a proposed summit in Hungary if he were invited.”

UKRAINE/EU (POLITICO): “European leaders aim to agree on a three-pronged package of support for Ukrainian President Volodymyr Zelenskyy to give him the strongest possible hand in negotiations over any potential truce. Their strategy includes more funding to Kyiv, more arms for Ukraine, and moves to hit Russia’s economy with new sanctions, according to diplomats and officials preparing for the Brussels summit.”

UKRAINE/EU (POLITICO): “EU leaders are set to instruct the European Commission to design a legal proposal to use billions of euros in Russian frozen state assets to fund a massive loan to Ukraine, after Belgium signaled it would not stand in the way.”

UKRAINE/EU (POLITICO): “Ukraine shouldn’t have to give up territory as part of a peace deal with Russia, the EU’s top diplomat Kaja Kallas said on Monday after U.S. President Donald Trump pushed Kyiv to give up land to end the war.”

RUSSIA (BBG): " Japan’s trade minister reiterated that the country aims to curb dependence on Russian liquefied natural gas, but can’t immediately halt imports. " 

US

FED (MNI POLICY): The Federal Reserve is set to cut interest rates for a second straight meeting next week, but the easing trajectory will be tempered by caution due to persistent inflation pressures. 

US/AUSTRALIA (BBG): "US President Donald Trump signed a landmark pact with visiting Australian Prime Minister Anthony Albanese to boost America’s access to rare earths and other critical minerals, an effort to counter China’s tight grip on the supply chains of key metals." 

OTHER

CANADA (MNI): Canadian household and business inflation expectations softened but remained elevated in the central bank's latest quarterly survey because of U.S. tariff concerns, even with soft output and hiring also suggesting some downward pressure on prices that led officials to lower interest rates last month.

ARGENTINA (WSJ): "A group of banks including JPMorgan Chase, Bank of America and Goldman Sachs is struggling to put together a $20 billion loan to Argentina without leaving themselves on the hook to the virtually-bankrupt South American country, people familiar with the matter said." 

JAPAN (RTRS): "Hardline conservative Sanae Takaichi is set to be voted in as Japan's first female prime minister on Tuesday, marking a symbolic shattering of the glass ceiling in a country where men still wield most power and setting the stage for a forceful shift to the right." 

JAPAN (BBG): " Japan’s ruling party leader Sanae Takaichi, who is poised to become the nation’s first female prime minister, is set to tap Satsuki Katayama as the country’s first female finance minister, according to local media." 

JAPAN (BBG): " Bank of Japan officials are of the view there’s no urgency to hike the benchmark rate next week even as the economy is making progress toward achieving their price target, according to people familiar with the matter." 

SOUTH KOREA (MNI BOK WATCH): The Bank of Korea board is likely to leave its base rate unchanged at 2.50% on Thursday, though a rate cut is expected in November as some board members adopt a more positive stance toward policy easing to support the economy, observers told MNI.

CHINA 

MONETARY POLICY (MNI): Advisors share their outlook for monetary policy ahead of China's Five-Year Plan reveal. On MNI Policy MainWire now, for more details please contact sales@marketnews.com. 

POLICY RATES (BBG): "China could see future cuts to the country’s loan prime rate as Beijing ramps up efforts to bolster domestic demand and stabilize the property sector, according to reports Tuesday in both the China Securities Journal and Shanghai Securities News." 

PRODUCTION (PEOPLE'S DAILY): "China must give greater strategic prominence to developing “new quality productive forces” for the next five year plan, according to a front-page commentary on the People’s Daily. " 

MNI: PBOC Net Injects CNY68.5 Bln via OMO Tuesday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY159.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY68.5 billion after offsetting maturities of CNY91 billion today, according to Wind Information. 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4196% at 09:30 am local time from the close of 1.4332% on Monday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Monday, compared with the close of 50 on Friday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.0930 Tues; +0.06% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0930 on Tuesday, compared with 7.0973 set on Monday. The fixing was estimated at 7.1219 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND SEPT. TRADE DEFICIT NZ$1.355B; AUG. -NZ$1.235B
NEW ZEALAND SEPT. 12-MONTHS YTD TRADE DEFICIT NZ$2.246B; YTD AUG. –NZ$3.058B

SOUTH KOREA OCT. FIRST 20 DAYS EXPORTS -7.8% Y/Y; SEP. +13.5%
SOUTH KOREA OCT. FIRST 20 DAYS IMPORTS -2.3% Y/Y; SEP. +9.9%

MARKETS

US TSYS: Treasuries Trend Sideways in Lacklustre Trading Day

Having finished the overnight US session modestly higher, US Treasury futures failed to follow on with TYZ5 remaining where it opened at 113-19 and USTs moves modest at best.  

• The US 2-Yr did very little during the Asian trading day, trending marginally higher to 3.46%
• The US 5-Yr had finished -2bps lower at 3.57% during the US trading day where it remained.  
• The US 10-Yr slipped back below the 4.00% overnight, finishing at 3.98% where it has held during the day today with eyes on it overnight to see if it can consolidate below 4.00%.  
• The USD 30-Yr was strong overnight rallying 3bps to 4.57%, and continued on in Asia down again to 4.56% The 30-Yr is now back at levels of April.

The key data releases tonight are the Philadelphia Fed Non-Manufacturing Activity, Redbook retail sales and MBA Mortgage Applications.  

JGBS: Modestly Richer, Oct 30 BOJ Hike At 25% Chance

JGB futures are stronger, +16 compared to the settlement levels, but off session bests.

• Cash US tsys are slightly mixed, with a flattening bias, in today’s Asia-Pac session after yesterday's gains.
• Cash JGBs are slightly richer across benchmarks, with yields 1-2bps lower. The benchmark 10-year yield is 1.0bp lower at 1.664%, outperforming the futures-linked 7-year. This continued the recent trend, which has unwound the relative cheapening of the 10-year earlier in the year.
• Japan sold ¥300bn of 10-year climate transition notes at a cut-off yield that was lower than expectations, signalling lacklustre investor demand. The cut-off yield was 1.680%, compared with 1.695% estimated by traders in a Bloomberg survey. The bid-to-cover ratio was 3.56x, compared with 3.31x in October 2024, the last time the government sold the bonds.
• Swap rates are little changed.
• BOJ-dated OIS pricing is little changed across 2025 meetings compared to early August levels. Pricing is, however, firmer for 2026 meetings out to July. Current OIS pricing implies just a 24% probability of a 25bp hike in October, rising to 65% by December and 82% by January. A full 25bps hike is not fully priced until March 2026. (see chart)
• Tomorrow, the local calendar will see Trade Balance data.

Figure 1: BOJ-Dated OIS – Today Vs. August 1

Source: Bloomberg Finance LP / MNI 

AUSSIE BONDS: Richer But Market Losing Its Conviction About Nov 4 Cut

ACGBs (YM +2.5 & XM +4.0) are stronger and at session highs on another data-light day. The local data calendar remains fairly quiet throughout the week.

• Cash US tsys are slightly mixed, with a flattening bias, in today’s Asia-Pac session.
• Cash ACGBs are 2bps richer with the AU-US 10-year yield differential at +13bps.
• Today’s ACGB auction of the Jun-54 bond showed strong demand, with the weighted average yield printing 0.92bps through prevailing mids and the cover ratio jumping to 4.0533x from 3.3500x from the previous auction. The strong demand came despite the bond’s outright yield being 20-25bps lower than the previous auction and around 30bps below the peak reached in May.
• The bills strip bull-flattened, with pricing flat to +2.
• Despite firming slightly in recent days, RBA-dated OIS pricing remains 7–13bps softer across meetings compared with pre-jobs data levels last week.
• A 25bp rate cut in November is now assigned a 68% probability (peak 80%, pre-data 38%), with a cumulative 23bps of easing (peak 25bps, pre-data 13bps) priced by year-end.
• Compared with the lead-up to previous cuts in this easing cycle, the market appears less certain than usual about a November 4 move.

Figure 1: RBA-Dated OIS – Cash Rate Vs. Priced Change Next Meeting

Source: Bloomberg Finance LP / MNI

BONDS: NZGBS: Closed Richer, NZ-US 10Y Diff Rich Vs. FV

NZGBs closed at or near session highs, 4bps richer across benchmarks.

• The NZ-US 10-year yield differential is approximately -2bps. However, a simple regression of the 1Y3M forward swap spread against the 10-year yield differential over the past 18 months suggests the current differential is 6bps too low versus FV. (see chart)
• Export growth is a bright spot in the NZ economy, which was up 19% y/y in September after 21% y/y. The strength is being driven by higher dairy prices but also an increase in milk & cheese export volumes.
• Credit card spending in New Zealand decreased by 2.1% month on month to NZ$4.34 billion in September after a 2% increase in August, while credit card balances fell 0.1% to NZ$6.06 billion in September, following a 0.7% rise in the previous month. - MTN
• RBNZ dated OIS pricing closed little changed across meetings. 26bps of easing is priced for November, with a cumulative 36bps by February 2026.
• The local calendar will be empty until next Tuesday’s release of Filled Jobs data for September.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

Figure 1: NZ-US 10-Year Yield Differential

 Source: Bloomberg Finance LP / MNI

FOREX: USD Index Drifts Up, USD/JPY Higher As Takaichi Confirmed As PM

USD/JPY is testing higher as Japan's parliament confirmed that Takaichi will be the next PM. We sit around 151..35/40 in latest dealings, with dips back to 151.00 supported. The result will not have been a surprise to the market, as her election holds since last Friday were close to 100, per Polymarket. Focus will now shift to the policy outlook (with cost of living/fiscal outlook, along with BoJ the early focus points). Earlier, we had headlines that Satsuki Katayama will be appointed as the new FinMin in Japan, who argued in any interview earlier this year the yen was undervalued. This only provided a modest bounce in yen. Other Japan officials have also stated there is no desire to excessively weaken the yen. This, along with intervention risks, may help cap the upside in the pair (outside of broader USD/yield moves). More meaningful resistance is likely in the 152/153 region, while the bull trigger is at 153.27. On the downside, the 50-day EMA is back near 149.00.

• The USD is drifting higher elsewhere as well, although aggregate moves are modest at this stage, with mixed crossed asset trends. The equity backdrop remains supportive, with US equity futures ticking up, while regional Asia Pac markets post strong gains led by the tech side. US Tsy yields are little changed, with the 10yr still under 4.00%. Gold is lower, consistent with some USD support.
• The BBDXY index is back up to around 1210.7 (+0.15% for the session so far), but this is familiar ranges for Oct (earlier highs were just above 1219, while we started the month sub 1200).
• NZD/USD is lower, but at 0.5725/30, remains within recent ranges, while AUD/USD has softened but remains near 0.6500 at this stage. AUD/JPY is edging back towards recent highs, last 98.30/35, aiming for an upside 98.50 test. NZD/JPY is near 86.60, just under the 20-day EMA resistance point and now little changed for the session.
• Later US October Philly Fed non-manufacturing and September Canadian CPI print. ECB President Lagarde and Board member Lane speak.

OIL: Increased Supply Being Monitored, US Inventory Data Tuesday

Oil prices have continued trending lower during today’s APAC session and have looked through news that the meeting between the US’ Rubio and his Russian counterpart Lavrov has been put on hold. The market is focussing on supply/demand developments with seaborne crude in transit continuing to rise as both OPEC and non-OPEC increase production.

• WTI (December contract) is down 0.2% to $56.90/bbl off the intraday low of $56.60. It made a high of $57.02 earlier but the break above $57 was very brief. Brent is 0.2% lower at $60.86/bbl after falling to $60.58. It rose to $61.01 early in the session but the break was only a moment.
• While geopolitical developments continue to be monitored, the focus remains on the expected market surplus by year end which is likely to result in inventory building. Crude at sea continues to rise and Rapidan Energy estimates supply growth is three times faster than demand (Bloomberg). US industry-based stock data is released Tuesday and the EIA Wednesday.
• While a Ukraine peace deal is likely to remain elusive, plans for US and Russian officials to meet including Presidents Trump and Putin had again increased hopes that sanctions on Russian fuel may be eased. The US administration is sceptical that sanctions work but the longer Russia avoids a ceasefire the more likely they will be extended.
• Later US October Philly Fed non-manufacturing and September Canadian CPI print. ECB President Lagarde and Board member Lane speak. 

Gold & Silver Fall As Equities & US Dollar Strengthen, Focus Remains On US

Gold has stabilised today during the APAC session after rising 2.5% on Monday. Prices rose to $4375.38/oz and then fell to $4332.95 and are now down 0.4% to $4340.5. Equities are rallying and the US dollar is slightly stronger (BBDXY +0.1%) but the factors bullion ignored yesterday may have also contributed to the pause in the rally. It is in overbought territory, 2025 Fed easing is already priced in, there is talk that the US government shutdown could end this week and US-China trade tensions appear to have eased. 

• Both gold and silver continue to hold well above initial support levels of $4140.8, 15 October low, and $48.736, 20-day EMA, respectively.
• The 1 November deadline for a US-China trade deal remains but President Trump said that the US will “be fine” with China. Economic Council Director Hassett also gave indications that the government shutdown could conclude this week.
• Silver is down 1.1% to $51.87 after falling to $51.607. It is a smaller market than gold and so moves tend to be amplified. It is also signalling that it is overbought.
• Equities are stronger across the region with the Hang Seng up 1.7% and ASX +0.7% but the S&P e-mini is flat. Oil prices are lower with WTI -0.3% to $56.84/bbl. Copper is 0.2% higher.
• Later US October Philly Fed non-manufacturing and September Canadian CPI print. ECB President Lagarde and Board member Lane speak. 

ASIA STOCKS: Trump Comments Drives HSI Above Key Technical

Japanese stocks reached another new high as Sanae Takaichi appears likely to become the next PM and deliver what is expected to be an expansionary fiscal policy and low rates.  China's key markets latched onto President Trump's comments that he expects the US and China will have a “really fair and really great trade deal together” with major bourses delivering solid gains.  The KOSPI hit yet another new high as the Korea Economic Daily reported that President Lee is considering cutting the top rate on dividends (as per BBG).  

• The NIKKEI is up over 700pts today reaching a new high of 49,929 and almost 5% higher in the first two days of the trading week.  
• Having trended below the 20-day and 50-day EMA earlier this month, today's gains of +1.8% takes the Hang Seng back above the 20-day EMA of 26,154.  The CSI 300 is up +1.5% today for its largest daily gain since before the October National Day holidays.  The Shanghai Composite is up +1.20% and the Shenzhen Composite up +1.6% as it nears its 20-day EMA, the second time this month it will try to hold above the key technical.
• The KOSPI is up on the dividend news, trending well above all moving averages and better by +0.6% today, and +2.5% already this week.  
• The Jakarta Composite is strong ahead of tomorrow's Central Bank +1.3% as it consolidates above the 20-day EMA.  

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
21/10/2025	0600/0700	***	GB	Public Sector Finances
21/10/2025	0700/0900		EU	ECB Lane at Macroeconomics and Finance Conference
21/10/2025	0900/1100	*	EU	government debt
21/10/2025	0900/1100	*	EU	government deficit
21/10/2025	0900/1000		GB	BOE Saporta Fireside Chat at Islamic Development Bank
21/10/2025	1030/1130		GB	BOE Bailey & Breeden on Private Markets at Financial Services Regulation Committee
21/10/2025	1100/1300		EU	ECB Lagarde Keynote at Norges Bank Climate Conference
21/10/2025	1230/0830	***	CA	CPI
21/10/2025	1230/0830	**	US	Philadelphia Fed Nonmanufacturing Index
21/10/2025	1255/0855	**	US	Redbook Retail Sales Index
21/10/2025	1300/0900		US	Fed Governor Christopher Waller
21/10/2025	1915/2015		GB	BOE Mann Fireside Chat at Lazard
22/10/2025	0600/0700	***	GB	Consumer inflation report
22/10/2025	0600/0700	***	GB	Producer Prices
22/10/2025	1100/0700	**	US	MBA Weekly Applications Index
22/10/2025	1100/1300		EU	ECB de Guindos at Barcelona Real Assets Meeting
22/10/2025	1225/1425		EU	ECB Lagarde Keynote at Frankfurt Finance & Future Summit