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Yen May Rise as US Government Shutdown Sours Market Mood

Yen May Rise as US Government Shutdown Sours Market Mood

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Yen may rise amid risk aversion as US government shutdown continues
  • IMF to unveil fresh forecasts in latest World Economic Outlook report
  • ‘Remain’-leaning UK House of Lords takes up formal Brexit legislation

A quiet day on European and US economic data front is likely to put sentiment trends at the forefront as the trading week begins. Futures tracking the benchmark FTSE 100 and S&P 500 stock indexes are pointing lower before London and New York come online, hinting at an overall risk-off bias. That may translate into gains for the Japanese Yen as investors unwind carry trades funded in the standby low-yielding currency.

Chief among the narratives shaping the markets’ mood in the near term is the ongoing US government shutdown. Congressional lawmakers failed to cobble together a budget deal over the weekend, so the horse-trading will continue Monday. The longer the impasse lasts, the greater headwind it will represent for overall economic growth, and thereby for market-wide risk appetite.

Elsewhere, the IMF will publish an updated World Economic Outlook containing forecasts that will include – among other new developments – the impact of fiscal stimulus to be provided by US tax cut legislation passed late last year. Meanwhile, the UK House of Lords – a relatively pro-EU body – will take up the European Union Withdrawal Bill, the legislation meant to formally pave the way for Brexit.

What are DailyFX analysts’ top trading ideas for 2018? Find out here !

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** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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