Hello traders, and welcome to Monday! The new trading week kicks off with a burst of political drama, and markets are reacting sharply. The two main stories of the morning come from Japan and France — both causing strong moves across currencies and indices.
The biggest market mover comes from Japan, where fiscal dove Sanae Takaichi has won the elections. Her victory is seen as dovish for the Japanese Yen, as investors expect more loose fiscal and monetary policy ahead. The result: a sharp weakening of the Yen, with major Yen pairs climbing rapidly. On the other side of the spectrum, the Nikkei index is surging higher, gaining significantly as investors welcome the prospect of easier conditions for corporations. Meanwhile, in Europe, another political headline hit the wires — French Prime Minister Jean-Yves Le Drian has resigned, a development that triggered a fast drop in the Euro’s value as traders priced in potential political instability. It’s clear that politics are in control of market sentiment at the start of the week.
From the macro perspective, the calendar is empty, which only amplifies the impact of these political headlines. The only scheduled events for today are speeches later in the evening from ECB President Christine Lagarde and Bank of England Governor Andrew Bailey, both of which could introduce additional volatility, particularly on the Euro and Pound.
Across the broader markets, gold continues to shine, pushing to new all-time highs, as investors hedge against rising uncertainty. Indices are trading mostly flat, with traders waiting for more clarity after last week’s gains. On the FX front, apart from the collapsing Yen and falling Euro, we can see strong performance from the commodity currencies — the Australian and New Zealand dollars are both gaining momentum, supported by improving risk appetite. The US and Canadian dollars are also showing moderate strength.
Turning to commodities, oil opened with a bullish gap, but that enthusiasm quickly faded as sellers stepped in, pushing the price slightly lower during the early European hours. Finally, in the crypto space, Bitcoin remains near its all-time highs, trading just below record levels, while Ethereum also holds a positive tone but is lagging slightly behind Bitcoin’s impressive performance.
All in all, Monday starts not with data, but with political fireworks — and markets are moving accordingly.