[MARKET ANALYSIS] JPY swiftly pares earlier strength as Buck garners haven demand

G10s are mixed against Buck with recent outperformers AUD and GBP underperforming against the Greenback, while Thursday’s CHF underperformance reverses.
USD is modestly firmer today as it gains some haven demand as stocks (NQ -2.2%) slip as tech weakness remains a theme. A couple of factors are driving today, but to summarise, Nikkei 225 was the target for selling amid the KOSPI closure overnight (due to domestic holiday), which saw stocks take a stronger negative lead from APAC and help the Buck. Aside from this, macro newsflow is light with crude a touch firmer as US and Iran continue to exchange strikes for the sixth day.
To recap the major geopolitical headlines, Iran claimed the US struck power facilities, bridges and civilian infrastructure - which Iran is firmly opposed to, with a lawmaker stating if the US struck Iranian infrastructure, all infrastructure in the region would be a legitimate target. The US session ahead sees UoM, Industrial production, and Import/Export prices. Remarks are slated from the typically dovish Jefferson. Levels to watch in DXY include the 21DMA to the upside, at 101.05.
GBP, which is set for a fourth week of gains, pulls back a touch from the 1.35 level as participants await the coronation of incoming PM Burnham. EUR/GBP also saw Sterling outperform for its fourth week, but like Cable, off recent lows as it reclaims 0.85. There remains a level of uncertainty around the incoming PM, with none of his cabinet officials confirmed as of yet, and many policies still unknown. ING expects a return to 0.870 in EUR/GBP by the end of the summer.
JPY is flat against the Buck despite c. 30pips of downside seen this morning. Japanese PM Takaichi said the govt. would pursue steps that encourage investment in Japanese financial assets, including by households and pension funds like the GPIF. To remind, last week FinMin Katayama said she would pursue steps to promote investment in Japanese assets by GPIF and others. There was some scepticism around this remark as while would be a textbook tactic to encourage domestic investment and passively limit outflows - Katayama is not in a position to direct changes, it would be under the jurisdiction of the Labour Ministry. Given the informality, participants previously believed this was another episode of verbal intervention - especially given recent remarks which imply the Finance Ministry will back down on direct, verbal threats. However, the remark coming from the PM herself carries more weight as of course she oversees all departments. We await further updates with a timeline around any potential GPIF changes, for now, JPY flat against the Buck near 162.50 despite earlier gains.