[MARKET ANALYSIS] DXY trades steady, AUD hit on dented metals, PM Takaichi spurs volatility, whilst polls for the ruling coalition look promising

The DXY is essentially flat and trades within a very narrow 92.17-97.29 range. Newsflow over the weekend has been light from a Dollar perspective, so attention will be on a data-packed week ahead (incl. ISMs, PMIs & jobs data) and on developments related to the current partial US government shutdown. On the latter point, lawmakers managed to work out a deal on Friday – the House is now set to vote on either Monday or Tuesday; House Speaker Johnson predicts the partial shutdown will end by Tuesday.
G10s are mostly losing vs the USD (ex-GBP & EUR), which are currently incrementally firmer. Nothing is really driving things for the GBP this morning (PMIs were revised a touch higher). In Europe, EZ PMIs were broadly subject to mild upward revisions, and this was reflected in the EZ-wide figure – nonetheless, it still remains in contractionary territory.
Focus this morning has also been on the Aussie & Kiwi, which are currently posting mild losses vs the USD. Downside comes amidst the continuation of pressure seen in underlying metals prices; XAU -4.5% this morning. From a central banking perspective, the RBA is set to give a policy announcement on Tuesday. Markets currently price in a 76% chance of a 25bps hike, a recent shift from expectations of a pause – traders cite strong jobs data and inflation remaining above target.
Volatile trade for USD/JPY. Initially gapped higher (154.84) and gradually rose towards a session peak (155.51) within an hour, before paring that move. Since, trade has been rangebound. The earlier bout of weakness in the JPY comes after Japanese press circulated comments via PM Takaichi, where she seemingly talked up the benefits of a weaker JPY. However, the PM thereafter took to X to clarify her position, pushing back on claims that her speech was related to the JPY itself, but rather to note that “we want to build a strong economy that is resilient to exchange rate fluctuations”. It can be inferred from her post that she accused some outlets of “cherry picking” her comments, concluding that “contrary to some media reports, I did not ‘stress the benefits of yen depreciation’”.
On the subject of Takaichi, recent polls suggest that the ruling LDP is likely on course for a landslide victory at the snap election this upcoming Sunday. In more detail, Asahi reported that the LDP-JIP coalition could “secure more than 300 seats”, far surpassing a simple majority of 233.