✅ USD/JPY Rises Then Falls — “Takaichi Trade” Fades; Euro Capped by French Bond Concerns

💹 Tokyo Session: “Takaichi Trade” Runs Its Course, USD/JPY Round-Trips

In the Tokyo FX market, USD/JPY showed a “round-trip” move — rising early before retracing gains.
With several U.S. economic data releases postponed, focus shifted squarely to Japan’s political landscape.

The coalition talks between the Liberal Democratic Party (LDP) and Japan Innovation Party (Ishin) have reached the final stage, and Sanae Takaichi is almost certain to be elected prime minister in tomorrow’s Diet session.

This news briefly reignited the “Takaichi Trade”, pushing USD/JPY from the mid-¥150s up to the low-¥151s.
However, profit-taking and yen short-covering in the afternoon pulled the pair back to the mid-¥150s.

Key factors behind the reversal:

• The Takaichi Trade already priced in, limiting upside potential.

• Hawkish remarks from BoJ board member Takata, reviving rate-hike speculation.

Overall, markets now await signs of policy execution capability and fiscal stance once the new administration is in place.

🇪🇺 European Session: French Bond Downgrade Fears Cap the Euro

In Europe, concerns over a potential French sovereign credit downgrade weighed on the euro.
Prime Minister Le Cornu’s cabinet seeks bipartisan backing to stay in power,
but the persistent fiscal-deficit expansion keeps downgrade pressure alive.

So far, no panic selling has emerged, and European equity futures remain stable.
Still, the market is keenly aware of the risk chain:
Rising French yields → Euro pressure, limiting upside momentum.

🕒 Economic Data & Event Calendar

Today’s scheduled releases (low impact):

• Eurozone Current Account (Aug)

• Eurozone Construction Output (Aug)

• Hong Kong Employment Data (Sep)

• Canada Industrial Product Prices (Sep)

With key U.S. indicators postponed, FX markets are likely to remain directionless and headline-driven.

Speeches:

• Schnabel (ECB Executive Board) – at ECB/BIS/CEPR conference

• Nagel (Bundesbank), Vujčić (Croatia CB) – at U.S. economic policy forum

• No Fed speakers due to the pre-FOMC blackout period.

Markets are focused on European officials’ comments and French bond developments.

💬 London Session: USD/JPY Rebounds on Takaichi Remarks

In early London trading, USD/JPY dipped to ¥150.28,
then rebounded to around ¥150.80 after remarks by Takaichi:

“The extraordinary Diet session will focus on economic measures.”
“We will implement solid, effective economic stimulus.”

These statements acted as a yen-selling catalyst.

📊 London Session Key Rates

✅ Summary

• USD/JPY: “Takaichi Trade” momentum faded — rise followed by retracement.

• EUR: French bond downgrade risk keeps upside limited.

• Overall: With no major U.S. data or Fed speeches, markets are driven by politics and European bond sentiment.

In the near term, Takaichi’s policy announcements and French sovereign-risk developments are likely to set the tone for short-term FX trends.