Tension in the Air to Start Week
USD / JPY is higher to start the week as Japan sabre rattles with China over the disputed islands. China is climbing the broader agenda as well with leaders promising unprecedented reforms. Trading in the UK will be soggy with hurricane force winds hitting the island.
Japan scrambled jets numerous times on the weekend after Chinese planes entered international waters near disputed territory.
Also in China , Yu Zhengsheng, a member of the 7 person Politburo that decides government policy warned that major changes will be announced after meetings next month.
"The depth and strength of the reforms will be unprecedented and will promote profound changes in every area of the economy and society", Yu said.
Officials will undoubtedly try to limit shocks but the Chinese administration has been tightening credit and liquidity so financial reforms could be severe. Policies geared at liberalizing yuan trading could also be brought forward. Expect that it will be less than 10 years before FX traders will have CNY on their tickers.
In the nearer term the market will watch the UK for potential flooding and damage as the strongest storm to hit England in 5 years bears down. Damage will probably be light but trading desks will be on skeleton staffs so that could limit liquidity to start the week.
A story that's sure to strain transatlantic relations is a report that the NSA has tapped Merkel's phone since 2002 and that Obama knew about it since at least 2010.
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