And it was going so well overnight: with the USD/JPY surging as high as 120.25 overnight, before finding its prefered equilibrium spot at 120, the Yen carry was doing its centrally-planned and mandated job of supporting market… and then a Bloomberg headline yanked the carpet from underneath it:
More details from Bloomberg:
Bank of Japan officials see little need for an immediate expansion of monetary stimulus and would prefer to hold off to get a clearer picture of the economic outlook, according to people familiar with their deliberations.
Board members who gather for Oct. 6-7 policy meeting want opportunity to observe further economic data and developments in financial markets at home and abroad, according to the people, who asked not to be named because talks are private
Needless to say this is a problem for liquidity-addicted algos: with the ECB last week making a solid case against more easing any time soon, all hopes were on the BOJ's October meeting to boost QE.
The BOJ, however, realized there are little incremental debt sellers that it can monetize debt from, as explained here on September 4 in “The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play”, and a result suddenly there is virtually nothing propping up the USD/JPY which is about 200 pips rich relative to the Nikkei.
Which is why said most important carry trade for global risk markets, the USD/JPY, suddenly took a 30 pip move lower, and dragged US equity futures down with it.
Because if the ECB won't boost QE, and the BOJ won't boost QE, and the Fed still pretending it will hike rates even as 6 out of 6 Fed surveys confirm the US economy is in a recession, just what is the upside catalyst again?
