EUROPEAN FX UPDATE: JPY lags as Japanese PM Ishina resigns, EUR eyes the French PM's confidence vote later today

USD: DXY -0.2%; 97.658

• Trickled lower in the European morning after rangebound APAC trade, and in the aftermath of last Friday's disappointing jobs data, which boosted Fed rate cut bets with money markets fully pricing in at least a 25bps cut at the Fed meeting on September 17th and a slight off chance for a 50bps move.


• Broader bias remains for a weaker dollar into year-end, with only sticky inflation risks seen as capable of prompting brief corrective rallies, whilst Fed independence remains one of the largest negative forces.


• On the topic of Fed independence, US President Trump said Waller, Warsh and Hassett are the three finalists for Fed chair nomination. In relevant news, White House’s Hassett said Fed monetary policy needs to be fully independent of political influence, including from President Trump, according to a CBS News interview.


• Newsflow is quiet to start the week amid the Fed blackout period and with US CPI and PPI data due later in the week. In terms of the day ahead, the US employment trends data for August is due, and follows the weaker-than-expected nonfarm payrolls data released on Friday. The NY Fed will publish its monthly survey of consumer expectations (last month: 1-year inflation expectations increased to 3.1% from 3.0%; 3-year expectations were steady at 3.0%; 5-year rose to 2.9% from 2.6%).


• DXY resides closer to the bottom end of today's current 97.644-97.942 range, with Friday's low at 97.430 and the 50 DMA today at 98.063.

EUR: EUR/USD +0.1%; 1.1730

• Holding modest gains against the softer dollar, though political risk remains in focus with French PM Bayrou’s government facing a confidence vote later today.


• EUR focus is on today’s French confidence vote (statement 14:00 BST / 09:00 ET, result ~18:00 BST / 13:00 ET), with PM Bayrou expected to lose as his coalition holds only 210/577 seats; failure likely forces resignation and raises risks of snap elections if no successor emerges. Macron may delay announcing Bayrou’s replacement until after the September 10 strikes, as domestic unrest could complicate the political climate.


• In geopolitics, the US and EU plan to discuss new sanctions on Monday, with European leaders visiting the US on Monday/Tuesday to coordinate on ending the war.


• According to IFR, options markets show growing topside interest, with traders skewed toward EUR/USD gains, though positioning suggests the bigger move may come further out the curve.


• ING note French politics is limiting euro upside, with spreads between French and German bonds at risk of widening further; they see volatility persisting in a 1.1650–1.1750 range this week and doubt Thursday’s ECB meeting this week will be a big mover.


• EUR/USD trades in a current 1.1703-1.1734 range with Friday's high seen at 1.1760 (vs low 1.1644).


• Notable OpEx for today's NY cut: 1.1700 (2.3bln), 1.1750 (2.3bln), 1.1800 (1.5bln)

JPY: USD/JPY +0.2%; 147.61

• Briefly climbed above the 148.00 level overnight amid political uncertainty after PM Ishiba announced his resignation, although the yen is off its worst levels as participants also digested the stronger-than-expected revised GDP data.


• Japanese PM Ishiba said he has decided to resign as LDP president and gave instructions to hold an emergency LDP leadership election, while he will continue to carry out responsibilities until a new leader is elected and thought it was the right timing to step down, given the conclusion of the Japan-US trade agreement. Furthermore, he said the party will decide on the schedule for the leadership race, and he will not run in the LDP leadership race.


• The political uncertainty from PM Ishiba's resignation is seen as potentially delaying a resumption of BoJ's rate normalisation. Currently, the first 25bps rate hike is not pencilled in until April 2026.


• Japanese GDP Revised QQ (Q2) printed at 0.5% vs. Exp. 0.3% (Prev. 0.3%), whilst the Japanese GDP Rev QQ Annualised (Q2) came in at 2.2% vs. Exp. 1.0% (Prev. 1.0%).


• ING highlights that markets are now treating fiscal risks more seriously, with Ishiba’s resignation raising the chance of a more fiscally expansive successor. They expect USD/JPY to stall in the 148.50–149.00 area rather than break 150, but politics may delay the move lower towards 145, previously their end-September call.


• USD/JPY sits closer to the bottom of a 147.51-148.57 range, with the overnight high matching Friday's peak, in which it printed a band between 146.81-148.57. To the downside, the 50 DMA today sits at 147.36.

GBP: GBP/USD +0.1%; 1.3515

• Lacks clear direction with price action contained near the 1.3500 level amid a very light calendar for the UK for most of the week until Friday's monthly GDP and output data.


• Desks note sterling remains vulnerable via Gilts, with UK government bonds still the “weak link” despite the recent abatement of last week’s global bond sell-off. Starmer’s cabinet reshuffle left Chancellor Reeves untouched, preserving her market credibility, but fiscal challenges remain.


• GBP/USD resides in a narrow 1.3482-1.3526 range, well within Friday's 1.3428-1.3555 parameter, with the 50 and 100 DMAs in close proximity at 1.3474 and 1.3459, respectively.

Antipodeans: AUD/USD +0.5% 0.6582; NZD/USD +0.5%; 0.5925

• Lacked firm conviction in APAC trade but edged higher during European hours to become the clear G10 outperformers at the time of writing, with the high-beta FX coat-tailing on the broader rise of base metals and broader constructive sentiment across the market.


• Overnight price action was capped as participants digested the weaker trade data from Australia and New Zealand's largest trading partner - China.


• AUD/USD tested Friday's high this morning (0.6588), with the July 25 high (0.6598) the next level. NZD/USD topped Friday's peak (0.5917) and takes aim at its 50 DMA (0.5943).

NOK

• Opinion polling for today's Norwegian election points to a continuation of the current Red-Green bloc, with a lead of around 6pp. Assuming this proves correct, then SEB believes the election will see a continuation of the current policy in Norway.


• EUR/NOK trades on either side of its 100 DMA (11.7274) in a current 11.6811-11.7554 range.

08 Sep 2025 - 09:55- ForexData- Source: Newsquawk