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“Endure what is difficult to endure and to suffer what is difficult to suffer.” – Hirohito

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

It’s been a quiet start to the trading week as equity futures trade modestly higher and US Treasury yields are modestly lower.  The only economic report on the calendar for the day is the Dallas Fed Manufacturing report which is expected to improve slightly from last month’s reading of -14.4. Just because the week is starting quietly, though, doesn’t mean it will stay that way.  In terms of earnings, this week is the second busiest of the reporting period, and the economic calendar is also jam-packed with Consumer Confidence, both the ISM Manufacturing and Non-Manufacturing reports as well as the Employment report on Friday.

While Japanese equity markets were closed for Showa Day, the yen has seen some wild moves overnight. When FX markets opened for trading last night, the yen sold off hard and the USD/JPY cross quickly crossed above 160 for the first time since 1990.  It didn’t stay at those levels for long, though, and buyers stepped in and the yen rallied.  After briefly dropping below 155, the cross is currently trading right around 156.  As shown in the chart below, after breaking above 152 just over a month ago, the yen has become unhinged.

It’s not often that the USD/JPY cross sells off more than 1% in a session and then reverses all those losses and more to finish the day with a rally of more than 1%. Since 1989, that’s only happened seven other times.  In terms of where in the yen’s cycle the seven prior reversals have occurred, there hasn’t been a clear pattern.  The two in the late 1990s came during periods of yen strength (decline in the USDJPY cross), but the more recent occurrences were all clustered right around the end of a sharp rally in the cross (weaker yen).

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