The US dollar saw some early strength but later lost momentum as European trading progressed, leaving it mixed against major currencies. Scandinavian currencies, the pound, and the New Zealand dollar underperformed, while the shekel gained after Hamas accepted the initial peace deal terms. Gold rebounded near $4,038 following early selling, just below yesterday’s record high of $4,060. French bonds and equities outperformed amid optimism that a political agreement could avert new elections. Meanwhile, Chinese mainland markets reopened after the long holiday, with stocks rising over 1% as Beijing introduced new export restrictions on key minerals and related technologies.

Asia Pacific Markets

In Japan, the yen weakened to around JPY153 per dollar, marking its lowest level since February, as traders digested political developments following Takaichi’s election as LDP leader. Market attention turned to negotiations with the Komeito Party, while Japanese bond yields showed minor movement, with the 40-year yield near 3.48%.
In Australia, the local currency fell below $0.6560 before rebounding to $0.6590, forming a potential bullish reversal pattern. Resistance near $0.6615 capped gains, but the currency steadied in early European trading. Next week’s economic calendar will feature the RBA meeting minutes and employment data, which could set the tone for the Aussie’s direction.

European Markets

The euro briefly dipped below $1.16, its weakest level since late August, before recovering as reports suggested France may soon appoint a new prime minister, potentially resolving its budget impasse. Despite soft German data, including weaker exports and industrial production, government forecasts remain cautiously optimistic about medium-term growth.
The pound, meanwhile, retreated toward $1.3340 after peaking near $1.3440, signaling renewed selling pressure. UK fiscal data showed a smaller VAT shortfall, but the budget remains in deficit. The 10-year Gilt yield hovered near 4.73%, while the market looks ahead to next week’s employment and GDP reports.

American Markets

The Dollar Index briefly climbed above 99.00 before easing back, with traders reacting to signs that France’s political tensions might be easing. The ongoing US government shutdown continues to weigh on sentiment, as recent polls indicate that the public largely blames Republicans for the stalemate. So far, negotiations to reopen the government remain stalled. Meanwhile, attention turns to speeches from several Federal Reserve officials, including Chair Powell, following the recent rate cut. Treasury yields inched higher, with the 10-year near 4.13%, as the US Treasury prepares to issue over $200 billion in bills and a $22 billion 30-year bond auction later today