The dollar continues to find bids on the week, as the supportive flows come amid a host of headwinds for other major currencies. The Japanese yen is facing a bit of a triple whammy this week. Sanae Takaichi, a big fiscal dove, won the LDP leadership election over the weekend but now faces struggles in forming a government amid disagreements with the Komeito party. The political uncertainty isn't helping and when you add to a technical breakout in USD/JPY, it's all helping to give USD/JPY a good boost to the upside.
Then in Europe, you have France's political turmoil stretching on with no real signs of it being resolved. Any prime minister if elected now will face the same impediments as Lecornu, so what's next for the second biggest economy in the euro area? The situation is unprecedented and Macron's head is now being called for. French bonds are under heavy pressure and things will remain tedious until lawmakers find a solution to the whole quagmire.
And today, you have the RBNZ cutting its overnight cash rate by 50 bps to 2.50%. That is more than what markets were expecting, though there were signs that the central bank could've gone with such a move. Still, the kiwi is being punished hard with NZD/USD down 1% to 0.5740 levels currently at the lows for the day. The pair is down to its lowest level since April now, testing waters below the September low of 0.5754.
On the week though, USD/JPY remains the standout mover in my view with the pair now coming up for air after having consolidated for the better part of the last three months.
The break above 150.00 gave buyers the right platform to build on before further yen weakness compounded things to a break to the highest since February now. There's a lot of breathing room in stretching on towards 155.00 next for the pair.
The dollar might have its own problems amid Trump's policy incoherence and signs of softening economic data. However, plenty of that has already been priced in while fresh risks are now arising for other major economies as seen above. So, that's resulting in traders having to move to price in those risks this week.
