North American FX Open - Ishiba comments lifts Usd/Jpy

The main FX pairings are pretty much where we left them last night, apart from the usual suspect, Usd/Jpy. The pair has jumped to 144.86 from around the 144.10 area, after Japan's new PM Ishiba stated that the country is "not in the environment now to raise rates again." Ishiba added that he had exchanged opinions with BoJ Governor Ueda on the economy and that they will do all they can to overcome deflation. The new PM vowed to make the economy strong with an economic package and stated that he expects the monetary easing trend to stay in place. It is worth noting that the Bank of Japan is independent, so Ishiba cannot influence the central bank to any great degree.

Earlier Ueda had said that Japan's economy is recovering moderately and that he expects the price trend to rise gradually.

Meanwhile the news flow is dominated by the escalation of the conflict between Israel and Iran. Yesterday evening, Israel was attacked by a large number of Iranian missiles. Israeli PM Netanyahu has vowed retaliation, which Iran has said would be met with a "crushing" response.

BBC News reported that Israeli PM Netanyahu described the attack as "a big mistake" and promised Iran "will pay for it" after Tehran launched a missile attack on Israel. The Israeli military says around 180 missiles were fired, most of which were intercepted. The escalation followed Israel's decision to invade Lebanon in a "limited, localized and targeted" ground operation against Hezbollah. The UN and EU have reiterated calls for a ceasefire, with the UN Security Council due to meet today and latterly the British broadcaster reporting another night of Israeli airstrikes in Beirut.

All signs now point to an October ECB rate cut, after the ECB's Kazaks stated that recent data point to a move next month, while Guindos warned that risks to growth are still tilted to the downside.

Last night the new SNB President Schlegel stated that the central bank can't exclude a return to negative interest rates. Schlegel added that downward risks to inflation are bigger than those to the upside and that he expects Swiss growth to be subdued in coming quarters. On the subject of FX, Schlegel insisted that while their main instrument is the SNB policy rate, they will not exclude being active in FX markets.

Also overnight, in the debate of the US VP candidates, Tim Walz and JD Vance sparred over abortion and the economy. Walz was viewed as stumbling over responses to tensions in the Middle East and previous misstatements, while Vance repeatedly targeted Democratic presidential nominee Harris. A CBS poll after stated Vance won by a tiny margin.

Today's US data focus falls on the ADP Private Payroll report, ahead of Friday's NFPs. We should also hear from the Fed's Hammack, Musalem, Bowman and Barkin, as well as the ECB's Elderson and Schnabel.

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