• Japanese yen surges as Ishiba wins leadership race to become next Japan prime minister
• Shigeru Ishiba wins LDP leadership race run-off, will be Japan’s next prime minister
• Weekly update on interest rate expectations
• BNP Paribas revises call and sees the ECB cutting rates in October now
• Goldman Sachs the latest to change their call on the ECB, now expects rate cut in October
• Spain September preliminary CPI +1.5% vs +1.9% y/y expected
• France September preliminary CPI +1.2% vs +1.6% y/y expected
• Germany September unemployment change 17k vs 12k expected
• Eurozone September final consumer confidence -12.9 vs -12.9 prelim
• UK September CBI retailing reported sales 4 vs -27 prior
• Fears of widespread damage as Hurricane Helene makes landfall in Florida

Markets:

• JPY leads, GBP lags on the day
• European equities higher; S&P 500 futures down 0.1%
• US 10-year yields down 0.4 bps to 3.784%
• Gold down 0.1% to $2,667.98
• WTI Crude up 0.2% to $67.82
• Bitcoin up 1.1% to $65,410

Shigeru Ishiba finally won Japan’s top job, as he won the LDP leadership race to become prime minister.

It’s been 12 years in the making after he lost out to then prime minister Shinzo Abe back in 2012. And when Sanae Takaichi led during the first round of votes, it looked like it might be another near miss again for Ishiba. But in the run-off votes, the odds turned in his favour and he came out as the winner.

As Takaichi led after the first round of votes, the yen fell hard with USD/JPY racing up to a high of 146.50. But the moment Ishiba was announced the victor of the run-off, that led to a sharp plunge in which the pair fell to 143.20. The low for the day then touched 142.76 before the pair is settling around 143.15 currently, down 1.1% on the day.

For some context, Takaichi had been one of the more vocal candidates and she strongly opposes the BOJ’s current plans for normalising monetary policy. She said that the rate hikes by the BOJ this year have been too quick for her liking and she would prefer rates to stay lower for longer.

Besides that, the larger focus in markets continues to stay on China and domestic equities ended the week with a flourish. The Shanghai Composite closed up by 2.9% and CSI 300 up by 4.5% today. And on the week, the former gained by nearly 13% and the latter by nearly 16% to its highest since October 2023. W Chinese stocks.

However, that didn’t quite lead to broader market moves today as compared to yesterday though.

The dollar held steadier throughout, with major currencies outside of the yen observing some light pushing and pulling during the session.

EUR/USD did fall to a low of 1.1125 as French and Spanish inflation numbers came in softer for September. That continued to rebuff expectations for an ECB rate cut next month, with the futures market showing ~94% odds priced in currently.

But with much of that already priced in, the pair bounced back a little to 1.1165 now – still down 0.1% on the day.

In the equities space, European indices are staying buoyed on ECB rate cut expectations. But the mood in US markets are less enthused with futures keeping marginally lower.

All eyes are on the US PCE price index next to add to the mix as market players look to wrap up the week.

This article was written by Justin Low at www.forexlive.com.