Forexlive European FX News 11 Oct: JPY weakness sends the USDJPY higher to 113

Risk leans on, but risk remains

Other markets

• FTSE +0.32% 
• Dax -0.47%
• CAC -0.34%
• Bitcoin +2.77%
• Gold -0.14%
• US oil +2.95%

Markets started risk on to start the week with the absence of any immediate fear. The JPY pairs were all higher as Prime Minister Fumio Kishida's said that he isn't considering capital-gains tax changes at present. the USDJPY touched 113 before pulling back. the continued rise in US 10 year yields really helped add to the shove higher. 

 Oil markets kept pushing higher on the three main drivers of low inventories, rising demand, and skilled OPEC market communication. 

The GBP trades higher too post the comments from the weekend out of Governor Bailey and Saunders around inflation concerns. EURGBP worth a look at as the German/UK bond yield spread sinks lower. The negotiations over the N.Ireland protocol will be a risk going forward for sudden moves in the GBP .A wider question exists over much further GBP upside. The question is this: 'How will the BoE hiking interest rates help was supply side driven inflation'. Surely it is the wrong tool for the job and will risk sending the UK into a recession? It is a great question and the higher the GBP goes the louder it will be asked.

Yields pushed higher and that could become a worry for stocks. 

 If yields are pushing higher on inflation fears a sudden surge higher will be a headwind for stocks. The VIX is recognising the risk and is currently sat at the key technical cross roads around 20. Close above 21.00 and stocks will start meandering lower again. Move back towards 18.00 and expect stocks to keep rising.

Could either be a sleepy next session with the US away or a ripper on the low volatility but lingering risk. All in all watch out for ballooning risk over the next 24 hours with so many worries around. Is it the energy crisis, inflation risk, Evergrande defaults, yields rising too quickly, or Brexit headlines? This is not the time to be heavy in risk. Be nimble.

October 11, 2021 at 11:33PM
Giles Coghlan
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