Rates as of 0500 GMT

Market Recap

Tremendous volatility in JPY and AUD!

Its hard to say exactly what triggered the move. USDJPY was moving lower JPY strengthening when the US personal income spending figures were released see above. The spending data was weaker than expected, which temporarily caused a riskoff move in the markets. Stocks rebounded, but then came off their highs. Since the Tokyo opening USDJPY has moved pretty closely in line with the SP 500 futures, suggesting that the move is in response to the overall risk environment.

The headline Tokyo consumer price index CPI came in weaker than expected, as did the tankan large manufacturers diffusion indices see table. These shouldve been reasons for the yen to weaken more reason for the Bank of Japan to keep its loose policy in place but they seemingly had no effect.

One reason the spending data may have hit markets so hard it caused the Atlanta Fed to downgrade its GDPNow estimate for 2Q US GDP to 1.0 from 0.3. Since US GDP contracted in Q1, this would mean the US is already technically in recession.

As a result, the Fed funds futures massively repriced their estimates for what the Fed is likely to do this year and especially next year.

Bond yields declined around the world

as did inflation expectations mostly.

You can see how a general riskoff mood captured the markets in the US afternoon and during Asian time by looking how the SP 500 futures tracked the copper price, both falling. This…