USDJPY Plunges To Lowest Since Nov 2016 After Weakest Japanese GDP In 2 Years

USDJPY tumbled to 107.01 - the lowest since Trump's election in Nov 2016 - after a disappointing GDP print signaled the beginning of the end of the 'global synchronous recovery'...

As Goldman Sachs writes, Japanese real GDP growth slowed sharply to +0.5% qoq annualized, representing a sharp slowdown from July-September (+2.2%) and coming in below the market forecast (+1.0%).

This is the weakest Japanese GDP growth since Q4 2015...

The GDP deflator turned negative qoq annualized (-0.8%, 0.0% yoy), resulting in a sharp slowdown in nominal GDP at -0.1%, from +2.6% in July-September.

Private demand remains solid, despite a sharp fallback of external demand and private inventories: The breakdown of real GDP shows private inventories and external demand, which substantially boosted July-September real GDP, made a negative contribution to October-December GDP. Despite this, however, private demand remains solid.

The reaction was swift, with USDJPY legging lower, stalling briefly at Sept 2017 lows, before tumbling to 107.01...

 

Yen is the strongest since November 14th 2016 against the dollar...

 

Of course, the perfectly correlated price action of US equity futures to USDJPY has decoupled amid this collapse...

Perhaps because the machines are too busy working overtime preparing for tomorrow's - likely to be historic - VIX options expiration.

As DataTrekResearch's Nicholas Colas notes, tomorrow could prove volatile as monthly VIX contracts will expire.

The VIX tends to experience wider intraday moves during monthly expirations than days when contracts don't mature.

The Cboe Volatility Index tends to have bigger swings on days its contracts mature, with intraday moves of 13 percent on average on the past 12 monthly expirations. That compares with a mean daily fluctuation of 10 percent in the year through January. Of course, that was before this month, when a record VIX surge on Feb. 5 sent its average intraday move for February to almost 60 percent.

Sign Up

Get the InvestingChannel
Free e-Letter Today

Learn More

Independent market opinion, analysis and ideas - delivered every business day

Premium market opinions, analysis, and ideas - delivered every business day

Editor's Picks