An eventless Asian session, with USD dynamics diving the markets, as the US dollar staged a comeback against its main competitors, as markets shift their attention from the US government shutdown fears to the Fed rate hike bets while Treasury yields extend their bullish momentum. The USD/JPY pair bounced-back towards 111 handle, up +0.10% on the day while the Antipodeans traded mixed in a tight range, unable to benefit from higher Asian stocks and oil prices.
Main topics in Asia
Fed's Williams - Faster growth & inflation could force Fed to hike rates rapidly
While talking to USA Today, San Francisco Federal Reserve President John Williams said the Fed could hike rates more rapidly than anticipated on faster growth and inflation.
German SPD backs coalition talks - RTRS
Reuters reports the weekend’s update from the German political environment, citing that Germany’s Social Democrats (SPD) voted on Sunday to begin formal coalition talks with Chancellor Angela Merkel’s conservatives.
Senate cancels vote on stopgap spending bill previously scheduled for 1 a.m. on Monday - Reuters
Senate to vote on stopgap bill noon EST Monday.
US government to remain shut Monday - Senator Cornyn
The No. 2 Republican Senator John Cornyn expects US government to remain shut Monday as lawmakers struggle to break the impasse, says Fox News channel.
Japan's fiscal target pushed back to the fiscal year 2027 - Reuters
Japan pushed back its projections for achieving a primary budget surplus by two years to the 2027 fiscal year, says Reuters.
Key Focus ahead
We have a data-light calendar to kick-off a busy week ahead that will be dominated by key central banking events. The Euroland has no data to report while the Eurogroup meeting will go on throughout the day. During mid-Europe, the German Bundesbank (Buba) will publish its monthly economic report, which is likely to have virtually no impact on the EUR markets.
The NA session also remains eventless, except for the Canadian wholesales sales release, as the US traders gear up for the housing and advance GDP data slated for release in the week ahead.
EUR/USD: US government shut down, ECB, where now from here?
EUR/USD was trapped despite a positive run in the European session on the back of firm data that rose the inflation prospects and end of QE speculation, (ahead of this week's ECB), which subsequently were underpinning yields pushing the 10-year German yield towards 0.60%.
GBP/USD - 10Y US-UK yield spread at a 10-month high, correction on the cards?
The GBP/USD turned lower from the high of 1.3945 and fell to 1.3839 on Friday on the back of a disappointing UK retail sales release.
The week ahead and key events- Nomura
Analysts at Nomura offered their outlook for the week ahead.
This Is Where I'm Buying EURUSD & GBPUSD This Week
We are looking for a pullback before buying with a close focus being paid to the 21-day exponential moving average (blue line) and the support/value zone between 1.2090 to 1.1950.
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