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EUR/USD is rebounding after significant losses, with a potential target near late October lows just below $1.08. GBP/USD remains steady, with critical support at the June low of $1.26, while USD/JPY has eased after a strong rally, raising concerns of possible intervention by Japan. A close below ¥152.00 could alter the bullish outlook for USD/JPY.
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UBS has raised its USD/JPY forecasts, projecting rates of 155.00, 152.00, 150.00, and 147.00 for December 2024, March 2025, June 2025, and September 2025, respectively, with a new target of 145.00 for December 2025. The note indicates a potential near-term rise to 158.00-160.00 if 10-year yields increase by 30-40bps, but views this as a peak likely to reverse in the medium term. Political dynamics, including President-elect Donald Trump's stance on JPY weakness, suggest mutual interests may favor a stronger yen.
China's singles' consumer spending festival appears to have bolstered October retail sales, while Japan's consumer spending showed unexpected strength despite negative export data. In contrast, the UK's industrial production figures were weak, and the US consumer is showing signs of recovery, with retail sales reflecting improved living standards amid concerns over future trade taxes.
U.S. markets are set to close the week lower as investors react to Fed Chair Jerome Powell's comments, which dampened expectations for a December rate cut. Despite a post-election rally, concerns over inflation and interest rates have overshadowed market enthusiasm, with the S&P 500, Dow, and Nasdaq all declining. Meanwhile, Japan's economy showed signs of recovery with a 0.3% GDP increase, while China's retail sales rose 4.8% in October, despite ongoing real estate challenges.
This week sees a continued rise in the US dollar amid a less dovish stance from the Federal Reserve, with rate-cut expectations for December dropping to 60%. Key earnings reports from companies like NVIDIA are anticipated, while the RBA and UK CPI data will be closely monitored for insights on inflation and monetary policy. Japan's core CPI shows signs of easing, but rising wholesale inflation raises concerns about future price pressures.
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Caroline Cai, CEO of Pzena Investment Management, believes that China's extreme stock valuations present a unique opportunity for investors, despite ongoing macroeconomic challenges. While her firm has increased its exposure to Chinese equities, others, like Adam Coons of Winthrop Capital Management, remain cautious due to potential short-term market reversals. Recent government measures, including a significant stimulus package, have led to a 20% rise in the CSI 300 index year-to-date.
SBI Digital Markets and UBS have launched tokenized money market funds under Singapore's Project Guardian, a blockchain initiative by the Monetary Authority of Singapore. The UBS USD Money Market Investment Fund Token is issued on a public blockchain but is accessible only to accredited investors through authorized partners like DigiFT. Meanwhile, the city of Lugano in Switzerland has issued a CHF 120 million digital bond, continuing its strategy of optimizing debt management through digital finance, although these bonds remain limited to commercial banks.
Goldman Sachs Group Inc.'s longest-serving partner in Tokyo, Shinichi Yokote, will retire at the end of the year after over 20 years with the firm. Yokote, who has been the chairman of fixed income and equities in Japan, confirmed his departure in an internal memo dated October 3. A replacement has not yet been announced.
Japanese benchmarks rose by about 0.8%, buoyed by a weaker yen amid slowing economic growth. In contrast, South Korean shares declined due to concerns over potential tax credit eliminations for electric vehicles. Meanwhile, the dollar stabilized after a five-session rally, supported by Fed Chair Jerome Powell's comments on interest rates.
Japan's GDP grew by 0.3% year-on-year in the third quarter, ending two consecutive quarters of decline, following a revised 1.1% drop in the second quarter. The Bank of Japan raised interest rates to 0.25% in July, the highest since 2008, with potential further increases if economic conditions improve. Following the GDP announcement, the Nikkei 225 rose 0.76%, while the yen weakened against the dollar amid ongoing volatility.
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