What Is Ahead: Shutdown, FOMC And ECB Minutes

Economic

Forex

Summary:

The economic calendar for the week ending 10 October includes Jerome Powell’s speech, the US Government shutdown, postponed statistical releases, and the publication of the FOMC and ECB meetings minutes. Weak private sector employment data paint a bleak picture and.

Weak private sector employment data paint a bleak picture and push the Fed towards aggressive monetary policy easing. This is especially true given that the White House has no intention of easing pressure on the central bank. Donald Trump recently posted a cartoon story about the dismissal of the Fed chairman. In this environment, Jerome Powell’s speech could provide investors with important clues.

As will the minutes of the meetings of the world’s leading central banks. Top ECB officials, including Philip Lane and Christine Lagarde, argue that the risks of inflation moving in either direction are limited. This allows investors to count on the end of the monetary expansion cycle. For the Fed, it has only just begun. In theory, this divergence should lead to the euro rising against the dollar.

However, the final word will be given by the US labour market report.

Source: FxPro

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Samantha Luan

Economic

Forex

Political

On October 4, Liberal Democratic Party (LDP) parliamentarians and its rank-and-file members selected a new leader for a party that was in disarray and searching for a purpose. The party spoke: they picked Takaichi Sanae, a conservative politician who last served as economic security minister, as their new leader. And considering that the opposition parties – which hold a majority in both houses – have given up on forming a unified front against the LDP, it is likely that she will become Japan’s first female prime minister.

The result took experienced pollsters by surprise. It was widely speculated that, by the sheer number of his Diet member votes, Koizumi Shinjiro – whom Takaichi defeated – would triumph in the second round of voting. However, although a wide range of polls suggested that Koizumi would secure more than 90 Diet member votes (there were 92 Diet members, including proxies, at his election launch party), his actual first-round total was only 80, followed by Hayashi Yoshimasa with 72, who finished third in the first round. This proved fatal, as his relatively weak support among the rank-and-file could not convince the Diet members that he was the “favorite son.” Koizumi’s share of the prefectural vote was 11, in contrast to Takaichi’s 36 votes. The final tally in the second round of voting was 185 votes for Takaichi, and 156 votes for Koizumi.

Takaichi’s victory can be attributed to three main factors. First, when pressed with a choice, a relative majority of the eligible voters viewed Takaichi’s conservative appeal – which could help reclaim disaffected conservative voters – as a greater asset than Koizumi’s youth and inexperience.

Second, there was division within the group formerly known as the Kishida faction, headed by former Prime Minister Kishida Fumio. According to Yomiuri Shimbun, although Kishida preferred his members to vote for Koizumi rather than Takaichi – whom he described as “Taliban” for her strong conservative beliefs – in the second round, some refused to follow his guidance. This was partly out of respect for Takaichi, who was the most popular candidate in the first round, and partly due to resentment toward Kishida for hedging his bets with Koizumi instead of focusing his efforts on electing Hayashi, who was supposed to represent his faction.

Finally – and perhaps most importantly – was the strategic maneuvering of party elder Aso Taro, who saw an opportune moment to return to the party mainstream. Aso directed his own faction, the only remaining formal faction within the LDP, and made side deals with Kobayashi Takayuki and Motegi Toshimitsu, who placed fourth and fifth, respectively, in the first round of voting, to throw their support behind Takaichi. The fact that Takaichi appointed Suzuki Shunichi – Aso’s brother-in-law – as the LDP’s secretary general, the party’s second-most powerful position, is widely seen as a reward for Aso’s contribution.

Takaichi’s path to the premiership is filled with potential stumbling blocks, any of which could shorten her time in power. The first question that arises is how she will unite the party when nearly half of LDP voters did not support her in the leadership race. If she fails to create a “team of rivals” by appointing her competitors to positions that satisfy them – a pledge she appears willing to honor – Takaichi may lack the necessary support to endure difficult times. This could lead to internal opposition that may challenge her leadership as her two-year term as LDP president draws to a close.

The second hurdle is how to maintain – and potentially expand – her party’s coalition partnership. Prior to the election, the LDP’s more than two-decade-long coalition partner, Komeito, warned that they would only form a government with a “moderate conservative” – a gesture widely seen as an attempt to pressure Takaichi into softening her policy stances. Aware of the LDP’s heavy reliance on Komeito in nearly every electoral district, Takaichi has indeed moderated her positions and reiterated that the coalition with Komeito is vital.

At the same time, Takaichi, along with other LDP candidates, floated the possibility of including a third party in the coalition, potentially the Democratic Party for the People (DPFP) or Nippon Ishin no Kai, in order to escape minority status in both houses of the Diet. However, Komeito has shown reluctance to include Nippon Ishin in the ruling coalition due to policy differences and electoral rivalry. It may take some time for Takaichi to find a viable path to break the legislative gridlock.

The extent to which she is willing to compromise her beliefs to enact policy will be a crucial test of her leadership. A fiscal dove herself, Takaichi is an outlier in a party dominated by fiscal hawks – including her benefactor, Aso Taro. Although she has argued for pursuing her dovish fiscal and monetary policies in a “responsible” manner, her decision to challenge party orthodoxy may provoke backlash not only from powerful figures within the LDP but also from the public, particularly if such policies lead to a weaker yen, accelerate inflation, or fuel populist discontent.

Takaichi’s attitude toward historical issues has also worried some more moderate figures. If, after taking office as prime minister, she follows through with a visit to the Yasukuni Shrine – a custom she has regularly practiced, though she did not explicitly mention it during this election campaign – it would lead to diplomatic friction with South Korea and China. This is something that Komeito has explicitly demanded she refrain from doing. Moreover, her strict stance on public safety, which stems from growing concerns about the increasing number of foreigners, worries Komeito, which prefers more harmonious policies toward immigrants.

Whether Takaichi can rebrand herself as a pragmatic conservative will be equally important in placating both her domestic partners and foreign neighbors. At the same time, she faces a dilemma: a quick shift to the center before solidifying her support among the right-wing base may undermine her mandate to bring conservatives back into the fold.

Depending on how everything turns out, it will determine whether Takaichi becomes a Margaret Thatcher – the politician she admires most – or a Liz Truss, whose short tenure as U.K. prime minister was marked by the announcement of an extravagant spending scheme (including tax cuts and subsidies) that resembles Takaichi’s own proposals. Becoming the first female LDP president – and having the premiership within reach – is a remarkable achievement in itself. Takaichi is now entering the arena where she must learn and perform the “art of the possible.”

Source: The Diplomat

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Gerik

Economic

Rising Yields Reflect Heightened Fiscal Strain

Treasury yields inched higher to start the week, signaling renewed anxiety about the government’s fiscal impasse. The 10-year Treasury yield advanced more than 2 basis points to 4.148%, while the 30-year yield rose 4 basis points to 4.755%. Shorter maturities also ticked upward, with the 2-year yield at 3.58%. These moves, though modest, underline investor unease as Washington’s stalemate stretches into another week without a funding resolution.

Since bond prices move inversely to yields, the uptick suggests selling pressure on longer-term Treasuries as investors reassess political risk. Markets are wary that a drawn-out shutdown could hurt economic momentum and delay monetary policy decisions due to a lack of official data releases.

Shutdown Stalemate Deepens Market Volatility

The fiscal deadlock stems from the failure of both Republican and Democratic proposals to secure sufficient support in Congress. Republicans have advocated for a “clean” continuing resolution maintaining current spending levels through November, while Democrats have tied their version to extending health care tax credits and other measures. The inability to reconcile these differences triggered the shutdown at the start of October.

White House National Economic Council Director Kevin Hassett warned that layoffs of federal employees could begin soon if President Trump concludes that negotiations “are absolutely going nowhere.” Approximately 750,000 federal workers face furloughs or unpaid status, which could slow consumer spending and weaken near-term growth indicators.

Data Blackout Complicates Fed’s Policy Assessment

The shutdown has created what analysts describe as an “economic data blackout.” Key reports such as September’s nonfarm payrolls, originally scheduled for release last Friday, remain delayed. This leaves both investors and Federal Reserve policymakers without essential information to gauge the labor market and inflation trends.

In the absence of government data, attention is shifting toward commentary from central bank officials. Fed Governor Stephen Miran is scheduled to speak Wednesday, followed by Chair Jerome Powell on Thursday. Additionally, the release of the Federal Open Market Committee’s meeting minutes may offer insight into how policymakers view the economic outlook amid fiscal instability.

Without new data, markets are forced to rely on private surveys and alternative indicators, increasing uncertainty around interest rate expectations. Although traders still anticipate a 0.25% rate cut later this month, the lack of clarity could heighten volatility in both bond and equity markets.

Market Sentiment and Broader Implications

The gradual rise in yields signals a subtle shift toward risk aversion. Investors are demanding slightly higher returns to hold long-duration Treasuries in a politically uncertain environment. Yet, yields remain anchored below midyear peaks, reflecting continued belief that the Federal Reserve will maintain an easing bias if fiscal disruptions weaken growth.

This dynamic illustrates a correlation rather than a direct causal chain: while the shutdown itself does not directly push yields higher, the broader market perception of U.S. fiscal instability contributes to diminished confidence in sovereign debt, leading to incremental yield adjustments.

Should the standoff persist, delayed data and government spending cuts could suppress economic activity in the fourth quarter, eventually prompting the Fed to adopt a more dovish stance potentially reversing the current uptick in yields.

Markets Await Policy Clarity Amid Fiscal Gridlock

The climb in Treasury yields reflects a cautious recalibration of risk rather than outright panic. Investors remain focused on Washington’s next moves and the Fed’s response to limited economic visibility. If Congress continues to stall, the compounding effects ranging from employment disruptions to weakened investor confidence could pressure yields back downward as safe-haven demand returns.

For now, markets remain trapped between short-term uncertainty and long-term policy expectations, with Treasury yields serving as a barometer of the uneasy balance between political dysfunction and monetary restraint.

Source: CNBC

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Gerik

Economic

China–U.S. Trade War

Tariffs at Record Highs, but No Fiscal Relief

Amid one of the longest government shutdowns in recent memory, Washington continues to collect unprecedented levels of tariff revenue. According to Treasury data, the U.S. government has gathered $31.7 billion in September alone and $190 billion since January a 160% increase from last year. On the shutdown’s first day, October 1, tariff collections amounted to $315 million, nearly enough to cover three-quarters of the $400 million daily cost of furloughed federal workers’ wages.

Despite these figures, the inflow of tariff money cannot be redirected to fund government operations without congressional approval. All revenue currently enters the Treasury’s general fund often called “America’s checkbook” which is used for paying pre-approved federal obligations such as tax refunds or outstanding debts. Once a shutdown begins, that account is effectively frozen for any new spending unless Congress passes a continuing resolution or an emergency allocation.

This creates a paradox: while Trump’s tariffs are generating revenue at historic levels, that income remains unusable until lawmakers agree on a budget, leaving vital public services paralyzed.

Political Deadlock Blocks Potential Solutions

The ongoing stalemate in Congress has prevented any consensus on how to use tariff proceeds to cushion the shutdown’s economic blow. The White House blames Democrats for refusing to pass a “clean” resolution, while Democrats argue that the tariffs themselves often described as “trade taxes” are the root cause of inflationary pressure and higher consumer costs.

White House spokesperson Kush Desai maintained that “no novel solutions” are needed, asserting that Democrats should simply “reopen the government by passing a continuing resolution.” In contrast, Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, countered that Trump’s tariffs are harming consumers more than they are helping federal finances.

“Congress should repeal Trump’s trade taxes and give Americans some relief,” Wyden stated. “Even Trump’s bloated tariff scheme brings in only a small fraction of the revenue needed to fund the military, national parks, highways, and other essential government services.”

Wyden’s criticism highlights a deeper policy divide: Republicans view tariffs as a tool of fiscal independence and economic leverage, while Democrats see them as regressive taxes that burden households through higher import costs.

Economic Reality: Symbolic Gains, Limited Impact

While the growth in tariff revenue is striking, its scale remains modest compared to the overall federal budget. The U.S. government spends trillions annually, with major programs like defense, Social Security, and infrastructure dwarfing the tariff inflows. Even if all $190 billion collected this year were redirected, it would only temporarily fund operations for a few weeks, not resolve the underlying budget impasse.

Moreover, tariffs have had mixed economic consequences. Though they add to Treasury receipts, they also elevate the cost of imported goods effectively shifting the tax burden onto American consumers and businesses. Economically, this dynamic creates a feedback loop: while the government gains short-term income, households face rising inflation and reduced purchasing power, undermining the policy’s broader effectiveness.

Fiscal Policy Collides with Political Strategy

The deadlock over tariff use underscores a deeper structural issue in U.S. governance revenue without authorization is inert. Without bipartisan cooperation, even extraordinary collections cannot offset the fiscal paralysis caused by partisan standoffs.

As the shutdown drags on, economic analysts warn of growing ripple effects: delayed regulatory approvals, suspended food and drug inspections, and reduced consumer confidence. Meanwhile, the symbolism of record tariff revenue contrasts sharply with the image of unpaid workers and shuttered federal services.

In essence, Trump’s tariffs have become both a political talking point and a fiscal paradox: generating revenue that the government cannot spend, while simultaneously imposing higher costs on the very citizens those funds are meant to support. Until Congress resolves its impasse, that contradiction will remain a defining feature of the current shutdown and a cautionary tale about the limits of unilateral economic policy.

Source: Yahoo Finance

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Michelle

Political

French Prime Minister Sebastien Lecornu tendered the resignation of his government on Monday, less than a day after naming his cabinet, after his ministerial picks provoked consternation amongst ruling alliance allies and opponents whose support is needed to pass a budget for 2026.

Here are some reactions to Lecornu's resignation:

MARINE LE PEN, LEADER OF THE FAR-RIGHT NATIONAL RALLY PARTY

"I call on the President of the Republic to dissolve the National Assembly (...) we are at the end of the joke, the farce has gone on long enough"," Le Pen told BFM TV.

FRANCOIS-XAVIER BELLAMY, EUROPEAN LAWMAKER, MEMBER OF THE CONSERVATIVE REPUBLICANS PARTY

"We have nothing to fear for ourselves from a dissolution of parliament."

DAVID LISNARD, MAYOR OF CANNES AND VICE-PRESIDENT OF THE REPUBLICANS PARTY

"The interests of France require Emmanuel Macron to resign in order to preserve the institutions and unblock a situation that has been unavoidable since the absurd dissolution. He is primarily responsible for this situation."

ARTHUR DELAPORTE, SOCIALIST PARTY LAWMAKER

"Failed by his own people, Lecornu's resignation was inevitable. This short-lived government illustrates only one thing: Macronism is plunging the country once again into chaos," he wrote on X.

AGNES PANNIER-RUNACHER, OUTGOING ENVIRONMENT MINISTER

"I despair of this circus where everyone plays their part, but no one takes responsibility," Pannier-Runacher wrote on X.

"To those who still think that we could govern without the Left, I say: you are mistaken. We can't move forward without sending out strong signals, without reaching out to those who, despite our differences, share the same ambition: to serve France and the French people."

JORDAN BARDELLA, PRESIDENT OF THE FAR-RIGHT NATIONALIST NATIONAL RALLY PARTY

"There is no doubt that the ephemeral Prime Minister had no room to manoeuvre, and it was certainly Emmanuel Macron himself who formed his government (...) there can be no stability without a return to the polls and a dissolution of the national assembly," Bardella told BFM TV.

JEAN-LUC MELENCHON OF THE FAR-LEFT FRANCE UNBOWED PARTY

"Following the resignation of Sebastien Lecornu, we call for the immediate consideration of the motion tabled by 104 MPs for the impeachment of Emmanuel Macron," Melenchon and other leaders of the France Unbowed party wrote on X.

FORMER IMF CHIEF ECONOMIST OLIVIER BLANCHARD

"Hard to understand what was in Macron/Lecornu's minds in presenting more or less the same government, with one largely unpopular addition. But equally striking is the degree to which the discussion is about people, and not about issues," Blanchard said in a post on X.

Source: TradingView

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Gerik

Economic

From U.S. Blockade to European Opportunity

China’s leading autonomous-vehicle technology firms are using Europe as a springboard for global expansion after being effectively barred from the U.S. market. With Washington’s national security restrictions limiting Chinese access to American data and infrastructure, companies like QCraft, Momenta, DeepRoute.ai, and Baidu are betting on Europe’s comparatively open regulatory environment to advance their global ambitions.

Beijing has encouraged this move by pushing its technology champions to dominate the global autonomous-driving sector, building on its already strong domestic foundation. In China, more than half of all vehicles sold including entry-level models now come equipped with some form of autonomous technology. That figure underscores how far China has progressed toward integrating automation into everyday mobility compared to its Western peers.

Dong Li, Chief Technology Officer of QCraft, described Europe as “our global future,” emphasizing the region’s accessibility compared to the U.S. market. His firm, which operates Level-4 autonomous buses in 26 Chinese cities, announced plans to open a German headquarters following this year’s Munich Auto Show.

Strategic Partnerships and Technological Integration

Chinese companies are leveraging partnerships with Western automakers to establish credibility and gain access to local data ecosystems. Momenta, one of China’s top autonomous-driving developers and a supplier to Toyota and General Motors, will begin testing Level-4 systems with Uber in Germany next year. It also plans to provide driver-assistance software to Mercedes-Benz in China technology that Mercedes is already testing in Europe.

Similarly, DeepRoute.ai intends to construct a European data center once pending agreements with automakers are finalized. These collaborations allow Chinese firms to operate within European regulatory structures while refining their technology for local conditions.

Yvette Zhang, an analyst at AlixPartners, noted that Chinese companies are driven by both market saturation at home and investor pressure to sustain growth. “They are looking for other markets to grow,” she explained, highlighting Europe as an attractive destination for higher-margin opportunities compared to China’s fiercely competitive landscape.

European Pushback and Calls for Fair Competition

While some European industry leaders see Chinese entrants as catalysts for innovation, others are demanding stronger protectionist measures. Jim Hutchinson, CEO of British startup Fusion Processing, argued that Europe must establish stricter oversight to maintain a “level playing field.” His position reflects mounting anxiety over data security, market fairness, and the potential displacement of European firms.

Nonetheless, voices such as Wayve CEO Alex Kendall advocate for openness and regulatory clarity. Kendall believes that competition from China will accelerate Europe’s lagging progress, remarking that “there’s acres of space to grow” in a market still in its infancy.

Tu Le, founder of Sino Auto Insights, offered a more pragmatic interpretation: with U.S. doors closed, “Europe is the only market they can come to.” This assessment captures the geopolitical undercurrent driving the current migration of Chinese technology firms westward.

Regulatory Fragmentation and the EU’s Response

Europe’s autonomous-driving landscape remains fragmented, with most countries permitting only limited Level-2 testing that still requires driver supervision. In contrast, Chinese regulators approved nine automakers for Level-3 public-road trials earlier this year, allowing partial hands-free operation.

Recognizing the competitive gap, European Commission President Ursula von der Leyen recently called for a continent-wide strategy to develop self-driving technology. Efforts are underway to harmonize regulatory frameworks across the bloc to enable broader testing and deployment, particularly in key markets like Germany and the UK.

Berlin-based startup Vay, which is testing self-driving robotaxis and remote-driven rental cars, supports this EU-level approach. Co-founder Fabrizio Scelsi emphasized that Chinese competition will compel “European players to sharpen their strategies very quickly,” adding that regulatory alignment is crucial for maintaining global competitiveness.

Economic Dynamics and the Race for Technological Dominance

The Chinese firms’ European expansion also reveals contrasting economic incentives. In China, where the electric-vehicle price war has compressed margins, automakers increasingly bundle autonomous systems at minimal cost or even free to attract customers. By contrast, these systems remain premium features in Europe, offering Chinese suppliers a more lucrative sales environment.

However, the surge of Chinese technology into Europe may intensify the policy debate between fostering innovation and safeguarding domestic industries. If Beijing-backed firms gain a strong foothold, European policymakers could face pressure to balance openness with security considerations, similar to the challenges seen in the electric-vehicle sector.

Europe Becomes the New Battleground for Autonomy

China’s pivot from the U.S. to Europe marks a pivotal phase in the global race for autonomous-driving supremacy. While Europe provides an entry point for expansion, it also poses regulatory, political, and competitive complexities that will test the adaptability of Chinese firms.

As the European Commission moves toward unified regulation and local startups prepare for stiffer competition, the continent is emerging as the decisive arena where the next generation of mobility technologies and the geopolitical alignments behind them will take shape.

Source: Reuters

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Glendon

Economic

Commodity

Oil prices rose more than 1% on Monday after OPEC+'s planned production increase for November was more modest than expected, tempering some concerns about supply additions, though a soft outlook for demand is likely to cap near-term gains.

Brent crude futures climbed nearly $1, or 1.5%, to $65.52 a barrel by 0905 GMT, while U.S. West Texas Intermediate crude was at $61.83, up 95 cents, or about 1.6%.

"The market was expecting a somewhat larger increase from OPEC+ as shown in the structure last week," said Janiv Shah, an analyst at Rystad.

"However the modest 137,000 bpd bloats the already-oversupplied balance for the fourth quarter of 2025 and 2026."

On Sunday, the Organization of the Petroleum Exporting Countries plus Russia and some smaller producers said it would raise production from November by 137,000 barrels per day (bpd), matching October's figure, amid persistent concern over a looming supply glut.

In the run-up to the meeting, sources said although Russia was advocating for an increase of 137,000 bpd to avoid pressuring prices, Saudi Arabia would have preferred double, triple or even four times that to quickly regain market share.

The modest production update also comes at a time of rising Venezuelan exports, the resumption of Kurdish oil flows via Turkey, and the presence of unsold Middle Eastern barrels for November loading, PVM Oil Associates analyst Tamas Varga said.

Saudi Arabia kept unchanged the official selling price for the Arab Light crude it sells to Asia.

While refining sources in Asia surveyed by Reuters had expected a slight increase, those expectations diminished as concerns about rising Middle Eastern crude supply felled the premium to a 22-month low last week.

In the near term, some analysts expect the refinery maintenance season starting soon in the Middle East to also help cap prices.

Rystad's Shah added that Chinese stockpiling of oil, along with the geopolitical risk premiums and inefficient trade routes and sanctions, were also supporting the benchmarks.

Expectations of weak demand fundamentals in the fourth quarter are another factor limiting the market's upside.

U.S. crude oil, gasoline and distillate inventories rose more than expected in the week ended September 26 as refining activity and demand softened, the Energy Information Administration said last week, with total product supplied - a proxy for demand - falling by 627,000 barrels per day in that week.

"If we see a steadier rise in production then the downside in oil prices may be contained. Much now depends on whether the U.S. economy can reaccelerate over the rest of 2025 and into 2026, which would help demand immensely," said Chris Beauchamp, chief market analyst at IG Group.