The USDJPY is surging after Sanae Takaichi’s leadership victory for PM is seen delaying, but not derailing, the Bank of Japan’s path toward higher rates. Her reflationary stance, rooted in the pro-growth “Abenomics” model of aggressive spending and loose policy, makes an October hike unlikely, with markets scaling back expectations sharply after her leadership win. Takaichi argues Japan still faces deflationary pressures, worsened by trade headwinds, and has pledged to prioritize demand-driven inflation through large-scale fiscal support. Analysts believe Governor Ueda will adopt a more cautious stance amid global uncertainties, though excessive delay risks renewed yen weakness beyond ¥150, amplifying imported inflation. While her policies may test the BOJ’s independence in the near term, she is not expected to reverse the tightening cycle entirely, as inflation remains above target and policy priorities have shifted toward maintaining price stability.
The USDJPY is higher by 1.90% to start the US session and trades at the highest level since August 1.
The dollar is higher vs the EUR (+0.56%)and the GBP as well (+0.38%) to start the US session.
In the video above, I take a look at the dollars advance vs the three major currencies and what it says about the bias, the risk and targets for each as the new trading week kicks off for North American traders.
IN other news, AMD and OpenAI have entered a multibillion-dollar, multi-year partnership in which AMD will supply AI chips beginning in the second half of 2026, providing up to six gigawatts of computing capacity. As part of the deal, OpenAI has been granted a warrant to acquire up to 10% of AMD, contingent on performance milestones, highlighting the strategic depth of the collaboration. Shares of AMD are up nearly 25% in premarket trading, while Nvidia is down -1.41% (after rising 5.29% last week), Broadcom is down -1.8%, and Micron is up 4%. The all time high price for AMD was reached in March 2024 at $227.30.
The major US stock indices are up with the Dow up 127 points, the S&P up 24 points and the Nasdaq up 192 point.
In Europe, retail sales rose 0.1% month-on-month and 1.0% year-on-year, showing modest resilience in August and coming in line with expectations. In the UK, construction activity remained in contraction, though the pace of decline slowed, with the construction PMI improving to 46.2 from 45.5 the prior month.
On the central banking front, ECB Chief Economist Philip Lane emphasized that monetary policy will remain data-dependent, with future rate decisions influenced not only by inflation trends but also by shifts in the overall risk distribution. He noted that while recent trade deals have reduced uncertainty, the long-term effects of the changing global policy environment are still unclear. Lane highlighted that persistent euro appreciation can have multi-year impacts on both growth and inflation, particularly if driven by external factors. He left the door open for further policy adjustments if warranted by the data, but stressed that minor or short-term deviations from the 2% inflation target would not trigger a response. His comments echo earlier remarks from ECB Vice President de Guindos, who warned he would become uncomfortable if the euro rose above 1.20 against the dollar.
OPEC and its allies agreed this weekend to raise oil production by 137,000 barrels per day in November (there were calls for perhaps a raise of up to 500,000), matching October’s increase and continuing their gradual unwinding of earlier supply curbs. The move, led by Saudi Arabia and joined by seven other members, is aimed at regaining market share lost to U.S. shale, Brazil, and Guyana, while also restraining members that have routinely exceeded quotas. The group’s cautious step reflects concern over oil market volatility, as traders had braced for a larger hike.
The price of crude oil is trading up $0.41 at $61.37.
The decision builds on previous rollbacks of production cuts, with a total of 2.2 million barrels per day already restored a year earlier than planned and another 1.65 million barrels per day being gradually phased out.
Looking at other markets, the US yields are higher helping to support the USD in trading today as well.
- 2-year yield 3.594%, +2.3 basis points.
- 5 year yield 3.742%, +3.5 basis points
- 10 year yield 4.159%, +4.1 basis point
- 30 year yield 4.755%, +4.1 basis points
Gold is surging another $54.75 or 1.41% at $3940.45 despite the dollars rise. That is a new record and has the price of metal inching closer and closer to the $4000 level.
Silver is also up $0.48 or 1.0% at $48.45 and moves closer to its all-time high price going all the way back to 2011 at $49.83.
Bitcoin moved to a new record over the weekend at $125,725. The price is currently up $1166 at $124,585
