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The Japanese yen continues to see a rise in strength early on Monday, as the Japanese and Americans seem to be coordinating attacks on the USD/JPY pair. The carry trade is being threatened with the backdrop of massive concern about the Middle East.
USD/JPY continues to be the main story, as the Bank of Japan continues to intervene, along with the possibility of the Federal Reserve, to protect the yen. The carry trade has been fueling a lot of leverage in the system for years, and it appears that it is still the biggest concern of central banks. The pair dropped another 1% almost immediately at the open.
The United States claims that a “framework of a deal” with the Iranians had been reached, with the Strait of Hormuz being opened. However, within the hour, Iran denied this, and even launched a missile at a tanker. It has become clear that the timing of these announcements from Washington coincides with the opening of stock indices like the S&P 500 futures late Sunday night in the USA.
Crude Oil has fallen hard at the open, losing 4% rather quickly, in reaction to the announcement by the US, but the ability to continue dropping will be tested by the contradictions being levied by the Iranian regime.
Speaking of Crude Oil, OPEC+ has approved an oil production quota increase of around 188,000 barrels per day on Sunday, to help alleviate some of the supply pressures in the market.
Japanese Manufacturing output rises at the sharpest pace for nearly 12.5 years. The increases in employment are solid, and firms continue to see a build-up of backlogs in work.
The Invesco S&P 500 Equal Weight Index booked record monthly outperformance versus the NASDAQ 100, with microchips dragging down the tech and AI thesis. This is part of the continued questioning of the Artificial Intelligence trade and profitability going forward.