USD/JPY fell by more than 100 pips early in US trade today but has climbed all the way back to unchanged at 132.85.

The bond market is the main catalyst as long-end yields move up. That was underscored by today's $21 billion sale of 30-year US bonds, which sold with a yield 1.1 basis points higher than the market anticipated. That boosted gains on the day in 30s to 8.8% with yields now at a three-week high of 3.13%.

Rising yields are an indication that money is flowing into stocks instead with the market feeling better about the growth outlook. They are also an indication that the Fed may not hike as much right away. That may mean higher inflation down the line and growing odds of under-tightening.

Looking at the USD/JPY daily chart, it underscores the jump last week on non-farm payrolls followed by the decline on CPI. But with a return to flat trading today, the pair is precisely where it was trading before the jobs report.

USDJPY daily

The big moves on data indicate a market that's waiting for more signals about inflation, growth and how central bankers plan to navigate a difficult economy.

I maintain that the way to look at the economy right now is that it's not a normal business cycle so the normal rules don't apply. Inventory building and supply chains are key inputs along with what happens in China regarding covid. Manufacturing data will be repeatedly skewed by the bullwhip effect and focusing too closely on declines in certain consumer spending categories will offer a misleading picture.

Overall, what will be key is the total level of consumer spending + accumulated savings. On the business side, I worry that all the recession talk will hurt business investment and become a self-fulfilling prophesy. At the same time, businesses surely must see the difficulty in finding workers and may be reluctant to engage in layoffs unless there's a clear drop in business.