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An earthquake in Japanese politics! The disintegration of the ruling coalition jeopardizes the path of female prime minister, and the U.S. data vacuum forces the market to find another way
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Out of the thorns, in front of you is a broad road covered with flowers; when you climb to the top of the mountain, you will see the green mountains at your feet. In this world, if one star falls, it cannot dim the starry sky; if one flower withers, it cannot make the entire spring barren.
Hello everyone, today XM Forex will bring you "[XM Group]: An earthquake in Japanese politics! The disintegration of the ruling coalition jeopardizes the path of a female prime minister, and the U.S. data vacuum forces the market to find another way." Hope this helps you! The original content is as follows:
Asian Market Trends
Last Friday, the U.S. dollar index plunged intraday, falling below the 99 mark, and finally closed down 0.56% at 98.835, ending a four-day winning streak. As of now, the US dollar is quoted at 98.90.
Court documents show that the US government plans to lay off more than 4,000 people, and the layoffs will be "dominated by Democrats." The U.S. military is facing a pay freeze due to the government shutdown.
According to xn--xm-5s9cx14e.comBC: Trump’s list of candidates for Federal Reserve chairman has been reduced to five people.
The U.S. Bureau of Labor Statistics will release the September CPI report at 8:30 am on October 24 (8:30 pm Beijing time).
The situation in Gaza-①Hamas: If Israel restarts military operations, it will fight back with all its strength. Hamas officials say the faction is ready to give up its authority to govern the Gaza Strip. ② The Sharm el-Sheikh Peace Summit will be held in Egypt on the 13th. It is reported that representatives of Hamas and Israel have stated that they will not attend. ③Trump will visit Cairo and Jerusalem to celebrate the ceasefire and hostage release agreement.
Pakistan and Afghanistan exchanged fire in the border area, and Pakistan closed its border crossing with Afghanistan. Trump: I heard there is "a war" between Pakistan and Afghanistan and I will try my best to solve the problem.
Trump: If the conflict between Russia and Ukraine cannot be resolved, Ukraine may be provided with Tomahawks.
Iranian military officer: Should we block the Sea of Hormuz?depends on the degree of external pressure on Iraq.
Japan may hold a nomination election for prime minister on October 20.
French Prime Minister Le Corny formed a cabinet again after his reinstatement.
India and Afghanistan have restored xn--xm-5s9cx14e.comprehensive diplomatic relations.
The President of Madagascar said that someone in the country was trying to "illegally seize power by force."
Summary of institutional views
Capital Economics: Japan’s fiscal uncertainty and economic weakness may lead to the postponement of interest rate hikes to January next year
Marcel Thieliant, head of Asia Pacific at Capital Economics, said that uncertainty about Japan’s fiscal outlook and weak economic data may prompt the Bank of Japan to postpone the next interest rate hike from October to January next year. He said that after Sanae Takaichi won the Liberal Democratic Party leadership election and Komeito withdrew from the ruling coalition, Takaichi needed to seek support from other political parties. This also gave the opposition more leverage to promote high-cost measures such as tax cuts equivalent to 2.8% of GDP. Weak manufacturing profits are likely to limit wage growth next year, while a sharp decline in the Bank of Japan's consumer activity index showed rising food prices are weighing on household spending. Recent xn--xm-5s9cx14e.comments from Bank of Japan officials also suggest they are in no hurry to tighten policy and are assessing the full impact of U.S. tariffs. Capital Economics pointed out that delaying interest rate hikes may keep the yen weak for a longer period of time, thereby supporting the Topix Index.
HSBC: Two core characteristics continue to constrain the performance of the euro
The euro area has made significant progress since the euro area debt crisis, but two fundamental characteristics continue to constrain the performance of the euro:
1. Excess savings and insufficient spending
Even if Germany is implementing a multi-year fiscal stimulus plan, our economists do not expect this to lead to a significant decline in the euro area's current account surplus. A surplus reflects excess saving (or underspending). While Germany's fiscal plan will erode its large current account surplus, the impact is expected to be limited, with the surplus falling to 4.7% of GDP in 2027 from 5.2% in 2024.
2. The historical internal offset mechanism has failed
Since 2004, Germany has maintained a huge surplus. But before the eurozone debt crisis, Germany's surplus would be offset by deficits in southern Europe. This means that, despite imbalances in current account balances among euro area countries, the euro area as a whole maintains a balanced current account with the rest of the world. High-spending Southern Europe offsets high-saving Germany.
Historical review shows that between the fourth quarter of 2003 and the first quarter of 2007, the GDP growth rate of the Eurozone exceeded that of the United States. Eurozone GDP growth accelerated from 1.0% year-on-year to 3.8%, while US growth slowed from 4.3% to 1.6%. The strengthening in relative growth was reflected in euro area asset prices. During this period, Eurozone stocks outperformed U.S. stocks by 40%. The market has pushed up interest rate expectations, and the two-year interest rate spread continues to narrow, helpingLi Europe and the United States rose 37%.
Bank of America: Credit card data shows that U.S. consumption is picking up, and what supports consumption is...
According to our aggregated credit card data, total credit card consumption per household increased by 2% year-on-year in September, which accelerated xn--xm-5s9cx14e.compared to August data. After seasonal adjustment, household consumption increased by 0.2% month-on-month, marking the fourth consecutive month of growth.
Looking at different income groups, the consumption of low-income families has recovered to some extent, but its growth momentum is still weaker than that of middle- and high-income groups. This is likely to be related to the slowdown in wage growth of this group. Not only do middle- and high-income families enjoy stronger wage growth, but the consumption of high-income groups also benefits from the wealth effect. Especially when the U.S. stock market performs well, the disposable income of the top 5% of households often expands more significantly than that of the middle-income group.
In addition, housing wealth plays a supporting role in consumption, and its distribution among different income classes is relatively balanced. Overall, however, the overall impact of housing wealth on consumer spending is likely to be more limited.
Deutsche Bank: U.S. dollar assets are still irreplaceable. There is no need to worry about the independence of the Federal Reserve, but next year’s policy will be dovish.
We have recently conducted a study on the future status of the U.S. dollar. Although the U.S.’s huge fiscal deficit still requires external financing support, the capital of global economies shows a “natural local preference” trend. Investors are seeking to hedge against the risk of a weak U.S. dollar, and some institutions are beginning to pay attention to sovereign debt markets outside the United States. The possibility of rising interest rates in Japan is seen as a potential opportunity. However, given the size and lack of liquidity of other fixed income markets, U.S. dollar assets are still irreplaceable. The main difference lies in the proportion of investment in US dollar alternative assets such as international spot gold.
In addition, we also discussed issues related to the independence of the Federal Reserve. Although we believe that its institutional strength is sufficient to deal with political pressure, the policy response mechanism tomorrow may turn more dovish. There are divergent forecasts for terminal interest rates, with most believing that the low of the interest rate cut cycle will be close to the current SOFR terminal interest rate level of 3.1%. In terms of U.S. debt management policies, the weighted average maturity of the Treasury Department's debt is expected to shorten, and the increase in the proportion of short-term bills is partly due to changes in demand brought about by the growth of stable currencies. In the context of the decline in activity of traditional international buyers, the identity of marginal buyers of government bonds has attracted attention, and the role of various intermediaries has become increasingly prominent.
Geopolitical escalation has prompted investors to shift from concentrated investment to geographical diversification. Canada is focusing on domestic infrastructure, and Europe has become an alternative. In a conversation with Fed Governor Milan, he advocated aggressive interest rate cuts at future meetings, citing reasons including that immigration restrictions reduce potential growth and make the natural interest rate lower than generally expected, and that reducing immigration would significantly suppress housing inflation. He emphasized that the size of the steady-state balance sheet is mainly determined by regulatory policies, and the inflation target framework should not be adjusted before the 2% inflation target is achieved.
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