North American FX Open - Usd/Jpy soars due to Japanese election uncertainty

Most of the main G10 FX pairings are little changed from where we left them on Friday, apart from some further Usd strength against the Jpy and the Aussie.

All the action has been in Usd/Jpy, which surged to 153.88 in Asian trade, after the Japanese general election resulted in the ruling coalition failing to win a majority in parliament for the first time since 2009, setting up a race among two main blocs to form a government.

Voters punished the ruling LDP for a corruption scandal, with a tally by public broadcaster NHK showing the LDP and Komeito with a combined 215 seats, short of the 233 needed for a majority in the lower house, with more than half a dozen other parties splitting the other 250. The main opposition Constitutional Democratic Party of Japan reportedly secured 148 seats.

The rise in US 10 year yields to 4.29% also helped the pair's ascent, but steady selling in Usd/Jpy has been a feature of European trade, sending the pair back to 152.47 so far.

Ahead of a big week of growth and inflation updates from the Eurozone, the ECB's Wunsch stated that their is no urgency for the ECB to speed up easing and that it could live with a small, temporary undershoot of its inflation target.

"Employment is high, real wages are rising and a soft landing is still the most likely outcome, so there is no urgency in further accelerating the easing of monetary policy," Wunsch added.

In China there were reports that the PBOC will conduct outright reverse repurchase agreements with primary dealers on a monthly basis (for no more than a year). Bbg write the move is aimed at maintaining a reasonable level of liquidity in the banking system and enriching the central bank's toolkit for monetary policy as it seeks to add more levers for fine-tuning the economy.

Oil prices have fallen sharply, after markets expressed relief that Israeli strikes against targets in Iran over the weekend avoided the OPEC member’s crude facilities, raising hopes for an easing of hostilities in the Middle East.

Data out of the UK showed a fall in the Lloyds Business Barometer to 44 in Oct from 47 in Sep, but price expectations fell to 61 from 65,

Meanwhile, a latest ABC News/Washington Post national poll showed Kamala Harris extending her lead over Republican candidate Trump by 51% to 47%. The latter held a rally at NYC’s Madison Square Garden, where Elon Musk claimed he can eliminate Usd 2tln from the federal budget.

A very quiet calendar delivers just the Dallas Fed manufacturing activity survey for October, while the ECB's Guindos is the sole scheduled major central bank speaker of note.

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