JPY: USD/JPY - Dips Lower As The USD Retreats, Dips To 154 Should Be Supported
The overnight range was 155.80 - 156.69, Asia is currently trading around 156.10. The pair slipped lower and remained under pressure most of the overnight session as the USD finally reacted to lower yields. The path forward though continues to look tough for the Yen and Japanese officials would have to do something extraordinary to change the narrative. The path of least resistance for me is still a higher USD/JPY and I suspect any dips back toward the 154 area would be used as buying opportunities.
- Bloomberg reports, “Japan’s largest labor union urged PM Sanae Takaichi’s government to do more to fight inflation to help ensure that workers’ wage gains outpace increases in the cost of living. Rengo Chair Tomoko Yoshino seeks a minimum 5% pay hike in negotiations.”
- Options : Close significant option expiries for NY cut, based on DTCC data: 154.00($2.14b),155.00($1.86b). Upcoming Close Strikes : 154.00($665m Nov 27), 154.00{$1.28b Nov 28), 155.75($750m Nov 27) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 112 Points
- Data/Event : Nationwide Dept Sales
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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ASIA: Coming Up In Asia Pac Markets On Monday
| 0050BST | 0750HKT | 1050AEST | Japan Sep PPI Services |
| 0230BST | 0930HKT | 1230AEST | China Sep Industrial Profits |
| 0915BST | 1615HKT | 1915AEST | RBA's Bullock -Fireside Chat |
Source: Bloomberg Finance L.P/MNI
FED: MNI Fed Preview - October 2025: QT, Or Not QT
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
