What a difference a day makes. Yesterday New York traders would not touch the JPY crosses with a 10 foot pole. Today they could not get enough of the stuff. We saw the JPY crosses trade with a bid tone throughout the New York session.  This bid was a carry over from the overnight news of the Abu Dhabi sovereign wealth fund pumping $7.5 billion into Citibank.  This news gave U.S. equity markets a much needed boost.  This boost in turn allowed traders to put back on some risky asset/carry trades. The JPY crosses had a furious rally on the back of stocks trading higher.  We saw USDJPY run from the 107.55 area up to the 108.90 area. EURJPY took off from the 159.75 level and never looked back to trade near 161.50.  High yielding carry trades like GBPJPY and AUDJPY saw even more impressive moves.  GBPJPY rallied from the 222.40 area up to the 222.25 area.  AUDJPY rallied nearly 2 full yen to trade from the 93.65 area up to 95.45.  The magnitude of the moves created by Citibank news could be an indication of the market becoming too risk averse.  While the U.S. financial system is by no means out of the woods, the slightest bit of good news looks like it creates almost panic buying of carry and stocks.  Today's market action can only lead to one conclusion and that is that volatility will be at a premium and remain there for some time.  With this type of volatility around, F/X traders will need to stay glued to their seats so they don't miss a beat. Periods of volatility like this do not last forever and the opportunities presented by these moves will not be around as often.

Tonight is relatively light on the data front. We are getting Japanese Retail Trade and Sales data.  The Asian markets have not been driven by data events lately so we will need to keep an eye on Asian equity markets.  If stocks in Asia can continue the rally started in New York we should once again see the JPY crosses rally nicely. If we get new bad news regarding credit issues for financial companies then we should see the risk/carry trades sell off again.

Upcoming Economic Data Releases

  • 23:50 GMT Japanese Large Retailers' Sales for Oct.; Expectations -1.2% vs. prior -2.0% (relevance: medium)
  • 23:50 GMT Japanese Retails Trade (YoY) for Oct.; Expectations +0.7% vs. prior +0.5% (relevance: medium)
  • 23:50 GMT Japanese Retails Trade (MoM) for Oct.; Expectations 0.0% vs. prior -1.5% (relevance: medium)