Stephen Innes
SPI Asset Management
The yen took a beating after Japan's ruling coalition fell short of a parliamentary majority, sparking concerns that political instability could delay the Bank of Japan's rate-hike plans well into 2025. Crude oil also slumped as Israel’s recent airstrikes on Iran steered clear of oil facilities, deflating another layer of geopolitical risk.
For local investors, however, the weaker yen is a silver lining. It boosts exporters and tempts traders back to Japanese stocks, weighed down by political uncertainty last week.
Tokyo trading houses most likely expected this outcome and swooped in on bargain-priced stocks. Much of the yen’s recent weakness reflects Japan's ultra-low interest rates compared to the U.S. and other major economies—a dovish stance likely to hold as Japan's new prime minister faces the hot seat of political challenges.
And with oil prices dropping like a stone and import costs easing, Japanese investors are breathing a sigh of relief.
Looking ahead, though, the U.S. dollar could remain on solid ground with sustained high rates in the U.S. as “Trump trades” build momentum. If Trump retakes the Oval Office, the prospect of tariffs could apply severe pressure on emerging markets, especially in Asia, adding a new layer of uncertainty to the regional market outlook.
SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.
Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.
Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.
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Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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