JPY: USD/JPY Falters As Bessent Comments On BoJ
USD/JPY has had a dip under 152.00 in latest dealings, as US Tsy Bessent comments cross the wires (following an X post). He is re-iterating what he stated to the Japan FinMin, around BoJ policy, as part of the trip to Japan. We are sub Tuesday lows, last near 151.55/60. The 20-day EMA is further south around 151.10/20.
- Via BBG: "*BESSENT: JAPAN'S WILLINGNESS TO ALLOW BOJ POLICY SPACE IS KEY", then via Rtrs: "BESSENT IN X POST: GOVT'S WILLINGNESS TO ALLOW BOJ POLICY SPACE WILL BE KEY TO ANCHORING INFLATION EXPECTATIONS, AVOIDING EXCESS FX VOLATILITY.
- This comes after earlier in the year Bessent stated that the BoJ was behind the inflation curve.
- These latest remarks are helping push USD/JPY lower, as Bessent is essentially arguing, in our view, the government shouldn't push back on BoJ normalizing policy, as if they do it risks slipping behind the inflation curve, which will drive great USD/JPY volatility. This would likely to be the upside, which would work against US efforts to balance US-Japan trade.
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US TSYS: Cash Open
TYZ5 is trading 112-12+, up 0-04 from its close.
- The US 2-year yield opens around 3.635%, down 0.01 from its close.
- The US 10-year yield opens around 4.166%, down 0.01 from its close.
- 10-Year yields persisted with its probe of the 4.20% area, I suspect buyers continue to be around 4.20% initially and look to fade the move higher. The jobs data if released will be key this week. A move back above 4.35%/4.40% is needed to negate the downtrend.
- MNI FED BRIEF: Fed's Barkin-Jobs Shakier, Inflation Less Troubling. The U.S. employment outlook has deteriorated following recent weakening in payroll growth and large downward revisions to past numbers, while inflation has not risen as much as had been feared due to tariffs.
- MNI US DATA: PCE Spending Looks More Robust After Revisions. August's PCE spending and income data showed robust spending dynamics, especially when strong upward revisions to Q2 are considered. However, the income data didn't cast quite as solid a light on the underlying dynamics.
- Data/Events: Pending Home Sales, Dallas Fed Manf. Activity
AUSTRALIA: RBA Widely Expected To Hold On 30 September
The focus of the week will be Tuesday’s RBA decision followed by Governor Bullock’s press conference. As it is widely expected to keep rates at 3.6% and there won’t be an updated set of forecasts, the tone of the statement and Bullock’s comments will be scrutinised after disinflation appears to have stalled in Q3 and the Governor said to a parliamentary committee last week that "domestic data have been broadly in line with our expectations or if anything slightly stronger". The Board is likely to remain highly data dependent.
- The RBA’s Financial Stability Review is published on Thursday.
- There is quite a bit of second tier data starting with August building approvals on Tuesday. After falling sharply in July due to the volatile multi-dwelling component, it is forecast to rise 2.6% m/m.
- Tuesday also sees private credit for August which is forecast to rise by 0.6% m/m again. In July it was 7.2% higher than a year ago.
- The final September S&P Global manufacturing PMI is released on Wednesday and services/composite on Friday. The preliminary readings moderated across manufacturing and services.
- August household spending, which has replaced retail sales, prints on Thursday and Bloomberg consensus expects a 0.3% m/m increase after 0.5% the previous month which would leave the annual rate at 5.2%.
- Merchandise trade for August is also published on Thursday and the surplus is projected to narrow to $6.2bn from $7.3bn.
