The dollar is slightly on the back foot once again
The yen leads gains as Trump said that talks with Mexico so far are "not nearly enough" as both sides are unable to reach a compromise on trade as of yet. Treasury yields are also holding lower so that's helping to also set markets in a bit more of a cautious mood.
Meanwhile, the dollar is slightly weaker on the day as traders continue to try and digest the hot topic in markets this week i.e. the prospects of Fed rate cuts this year. That said, the movement among major currencies are rather subdued with trading ranges still very narrow.
Despite the weaker tones in the yen and bond yields, equities are once again showing more signs of complacency in my view as US futures are only down by 0.1%. This follows decent gains yesterday and solid gains seen on Tuesday.
There's a particular disconnect between the way the yen and bond yields are behaving when you compare them to US stocks:
Plotting the chart comparison above, it's making for little sense as to why equities are holding up at levels they are now when the yen and bond yields have slipped noticeably. What's more startling is the gains in equities this week, it totally doesn't match up to price action in the currencies and bond markets.
That's a lot of hope being put into Trump's tariffs threat against Mexico not materialising. Because if there is no deal and tariffs are levied, expect much pain for equities to follow as they play catch up to the yen and Treasury yields.
