Uncertainty prevails
GBP/JPY is the biggest mover today in the FX world. The pair is down about 0.5% (80 pips) in a day with not too much going on in terms of volatility.
Tomorrow is the big EU meeting in Brussels as May wrangles for a Brexit extension. All signs are positive and a long or flexible extension remove the risk of a no-deal Brexit while potentially upping some political risks within May's party.
All told, every market participant I know is tired of Brexit. The ebb and flow will continue but it now looks to be stuck in purgatory forever so the market will pivot back to UK economic headlines in time.
The yen, meanwhile, will remain a proxy for the risk trade. You would think it would be having a rough year because of the incredible run in stock markets but that's not the case. The yen is down just 1.27% YTD vs the dollar and is up 1.8% against the euro. What that underscores is that equities have rebounded on central bank easing alone. Economic data has been middling at best and the central bank pop won't last if it isn't followed by some data with a bit of sizzle.
What captures it all is the chart of GBP/JPY. It crumbled at the start of the year in the flash crash but it's chopped sideways for the past six weeks. After four days of losses were near som minor trendline support but there is still about 100 pips of breathing room until the March low of 143.73.
I think AUD/JPY provides a similar kind of risk trade without the Brexit noise but this chart is a good one for confirmation.
