Goldman Sachs Economics Research team with a note on the yen gyrations Thursday
- USD/JPY more than 1% below its pre-crash level
- following the Sterling flash crash in October 2016 … GBP/USD settled three big figures below its previous level
- we think it shows that the market is going through a bumpy adjustment to new demand dynamics that can last for a while
in 2018 … two traditional drivers of USD/JPY
- global risk sentiment
- and US interest rates (driven by Fed tightening)
were moving in opposite directions … With US data "catching down' to the global trend. volatile equity markets driving repatriation back to Japan and the Fed signaling that it will take its cue from financial conditions. those JPY drivers are more in sync.
we think recession fears are overdone and growth jitters should abate
But for now the price action shows that markets are going through a difficult adjustment. and that can continue for some time.
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Thoughts/comments welcome! I reckon GS are correct on 'can continue for some time' but also they are a bit too optimistic that growth jitters should abate … maybe China/US trade talks will be on the GS side though …. we'll see.
