FOREX: USD - BBDXY Well Supported Heading Into FOMC

JGB futures are weaker and near session lows, -20 compared to settlement levels.

• "JAPAN PM TAKAICHI: NOT RULING OUT SALES TAX CUT AS OPTION IN FUTURE, BUT IMMEDIATE PRIORITY IS TO COMPILE PACKAGE OF STEPS TO CUSHION BLOW FROM RISING COST OF LIVING, CHANGING SALES TAX RATE WOULD TAKE TIME, SO DECISION ON WHETHER TO DO SO WOULD NEED TO TAKE INTO ACCOUNT WAGE, INFLATION LEVELS AT THE TIME - [RTRS]"
• MNI: BOJ board members largely agreed on the need to raise the policy interest rate eventually but saw no urgency to act at the Oct 29-30 meeting, preferring to confirm sustained wage momentum and the firmness of underlying inflation, according to the summary of opinions released Monday.
• Cash US tsys are 3-4bps cheaper in today's Asia-Pac session after headlines that key US Senate Democrats will advance a GOP bill to end the government shutdown. Risk appetite is firmer.
• Cash JGBs have bear-steepened across benchmarks, with yields flat to 3bps higher. This leaves the 2/30 curve within its well-established range ahead of tomorrow’s 30-year supply. (see chart)
• The benchmark 30-year yield is 2.6bps higher at 3.13% versus the cycle high of 3.351%.
• Swap rates are 1-3bps higher.
• Tomorrow, the local calendar will see Trade balance and Bank Lending data alongside 30-year supply.

News of an imminent end to the lengthy US government shutdown has boosted risk sentiment in Monday’s trading and thus helped to drive oil prices higher. The impasse was seen to be costly to the economy and would as a result weigh on energy demand. WTI is up 0.8% to $60.25/bbl, close to the intraday high, after falling to $59.74 early in the session. Brent is 0.7% higher at $64.08/bbl after falling to $63.60. Prices remain range bound as the market looks for new information.

• News from the US says that enough Democrats in the senate will vote to pass a bill to end the government shutdown which is in its sixth week.
• The US dollar is slightly higher while the S&P e-mini is up 0.7% and copper +1.6%.
• The market will monitor monthly reports closely this week for any deterioration in the excess supply situation. The IEA increased its 2026 surplus forecast in its October monthly report. It publishes updates on 13 November, while its annual outlook, EIA short-term energy outlook & OPEC report are out 12 November.
• The uncertain impact of additional sanctions against Russia has been providing a floor to oil prices. However, US President Trump has given Hungary a one year exemption from the US sanctions on Russia’s Rosneft and Lukoil, as “it’s very difficult for him [Hungarian PM Orban] to get the oil and gas from other areas”. According to Bloomberg, Hungary imports 90% of its oil from Russia.

The NZD/USD had a range today of 0.5616 - 0.5634 in the Asia-Pac session, going into the London open trading around 0.5630, +0.15%. A combination of what looks like the end of the US shutdown and better China Inflation data has seen the NZD start the week drifting back up off its lows. The NZD continues to trade heavy but it is prudent to be wary of what the reaction to the end of the US shutdown might look like. I am a little wary of positioning in the NZD market though I still suspect any decent bounce will again attract sellers. The first sell area on a pullback would be around 0.5750 and then the more pivotal 0.5850 area.

• "NZ'S PM LUXON WANTS BANKS TO PASS ON RBNZ RATE CUTS FASTER" - BBG
• Bloomberg reports the NZ Treasury says, “New Zealand Economic Recovery Still Emerging. New Zealand’s economy has more spare capacity than previously assumed while a broad-based recovery is still emerging, the Treasury Department says in its Fortnightly Economic Update.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5380(NZD460m Nov 13), 0.5600(NZD538m Nov12), 0.5800(NZD461m Nov 12) - BBG

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P