• Japanese Yen weakened following the unexpected outcome of the Liberal Democratic Party (LDP) election.
• The Euro is under pressure due to political uncertainty surrounding France.

What Moved the Markets Last Week?

The US service economy barely grew last week, as the headline ISM index slowed to a level of 50 from 51.7, hitting the threshold for stagnation. This occurred despite an uptick in the employment sub-component to 47.2. Critically, the cost-of-doing-business indicator, Prices Paid, jumped to a high of 69.4, reinforcing concerns about inflation. Market reaction saw the US Dollar drift slightly lower.

The final UK PMI releases for September delivered further bad news for Sterling, confirming that the country’s private sector saw a slower rate of activity than initially projected.

The US Dollar is advancing as the Japanese Yen weakens. This follows the surprise win of pro-stimulus lawmaker Sanae Takaichi in the LDP leadership contest, which the markets view as potentially “dovish” for the Bank of Japan (BoJ)—suggesting a delay or softening of tighter monetary policy.

The Euro is struggling due to domestic political concerns in France. President Macron’s decision to retain much of his previous cabinet has fuelled political uncertainty and raised fresh concerns about the stability of the government.

The Week Ahead: Central Bank Spotlight

The economic data calendar is notably light this week due to the ongoing US government shutdown, which continues to delay the release of important official economic indicators.

As a result, attention shifts to central bank communication:

Today’s Focus: The immediate agenda is limited to public remarks from officials at the European Central Bank (ECB) and the Bank of England (BoE).

Key Highlights: The main events will be the release of the minutes from the latest US Federal Reserve (Fed) meeting on Wednesday, followed by the ECB minutes on Thursday. These documents will offer vital insight into recent policy discussions and future outlooks.

In short: Global political news (Japan, France) is driving currency movements, filling the void left by a quiet US data calendar. This week is all about reading the tea leaves from the Fed and ECB meeting minutes.

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