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- Yen weakens to August 2025 lows on election results.
- Euro declined to a 1-week low on the resignation of France’s new PM during a political crisis.
- Gold and silver soared to new record highs on US government shutdown.
FX markets have been extra volatile due to political shockwaves across the US, Europe and Japan.
The Japanese yen declined significantly against G7 currencies, caused by the recent elections in Japan, while the euro plunged due to the unexpected resignation of France’s Prime Minister amid France’s political crisis.
Meanwhile, the US government shutdown continues, delaying key economic data, especially the labor market data for September, sending precious metals to new all-time highs.
Japan’s Newly Elected Prime Minister Sparks Yen Weakness
Japan elected its first female prime minister, Sanae Takaichi, leading to a surprise victory for the Liberal Democratic Party. Takaichi was the minister of economic, security and internal affairs in Japan and is known for expansionary fiscal policies, aiming to prioritize government spending. ⁽¹⁾
Takaichi’s win has led traders to scale back their expectations of an upcoming interest rate hike by the Bank of Japan, wh o is seen as a fiscal dove aligned with Shinzo Abe’s “Abenomics”, a strategy of monetary easing, fiscal stimulus and reforms to support growth. ⁽²⁾
Source: LSEG Table Showing BOJ Probabilities for Interest Rate Changes
USD/JPY soared 1.8% to August 2025 highs above 150, which marked the largest daily gain for the pair since May 2025. GBP/JPY and EUR/JPY also rose more than 1%, reaching 201.6 and 175.3 respectively.
Source: TradingView USD/JPY Chart
France’s Political Crisis Deepens, Euro Falls
Meanwhile in Europe, France moves deeper into its political crisis after its new Prime Minister Sebastien Lecornu resigned just 3 weeks into the job, marking the shortest-lived government in modern France.
Lecornu’s resignation, announced hours after unveiling his cabinet, came amid intense pressure from leftist lawmakers over his budget plans. ⁽³⁾
EUR/USD fell below 1.17, hitting a weekly low, alongside French stock market, the CAC 40, dropping 1.5% after the announcement. France’s 10-year government yields reached a 10-day high at 3.58%, putting more pressure on debt and refinancing costs.
Source: TradingView EUR/USD Chart
President Emmanuel Macron, who has seen five prime ministers come and go in the space of two years, faces growing challenges in forming a stable government capable of passing a plan on cutting budget deficits. The political crisis has damaged the euro zone’s second-largest economy into further uncertainty, unsettling European markets. ⁽⁴⁾
Precious Metals Continue to Break Record Highs
Gold and silver continue to breach record highs, driven by safe-haven demand amid growing worries over a prolonged US government shutdown. Gold rose above $3,900 while silver reached April 2011 highs at $48.
The shutdown extended into this week after the Senate failed to advance competing plans to extend federal funding last Friday.
Source: TradingView, Silver Chart
Source: TradingView, Gold Chart
The shutdown has delayed the release of high-impact economic data. But even without fresh data, traders will closely monitor remarks from Federal Reserve officials this week for more clues on the central bank’s policy outlook.
Silver remains supported by tighter supply conditions. The Silver Institute forecasts a global market deficit for a fifth consecutive year in 2025. ⁽⁵⁾
Broader Market Impacts and US Uncertainties
The pound also fell today by 0.2% against the US dollar, removing its gains of 0.6% from last week. The Bank of England has kept rates unchanged in its previous meeting, with no probability of monetary policy changes for now until 2026 due to high and persistent inflation.
Source: TradingView, GBP/USD Chart
Moving on to the other side of the Atlantic, the US government remains shut down, delaying the release of key economic data including the September labor market report as US markets remain on edge, awaiting further clarity.
The delay in data has reinforced expectations of monetary policy easing from the Federal Reserve, with Fed Funds Futures showing a 95.7% probability of a 25-basis point rate cut. The US dollar index rose 0.74% on yen and euro weakness. ⁽⁶⁾
Brent crude oil extended gains from yesterday after OPEC+ announced its production hike on Sunday with a more moderate approach than expected. OPEC+ raised production by 137,000 barrels per day for November, reducing concerns on oversupply risks. The group’s decision reflects a stable global economic outlook and healthy market fundamentals, with flexibility to adjust output if conditions change.
