The Yen was a safe haven yet again overnight as Yen pairs suffered a major flash crash after Apple issued a revenue warning for 2019. The news from Apple which saw shares plunge 8% in after-hours trading saw a wave of risk aversion flood the FX markets as investors added this story to the thin liquidity and already fragile investor confidence stories. Stock markets have been wildly volatile over the last few weeks with almost daily large swings on Wall Street. Worries about global growth continue to lead investors to seek out safe havens, with focus seemingly switching to the Yen.
USDJPY collapsed from levels around 108.90 to around 104.10 in the space of a few minutes in Asian trading overnight. There is a lot of talk about thin liquidity being one of the main reasons that the move was so aggressive. The time of the day and the date are key to this thought process, as much like the flash crash on Sterling back in October 2016 the move happens at a relatively quiet time of the trading day for both Asian and European traders. Asian traders are not only not quite at their desks during the timing, but Japanese markets are not back from their holiday yet.
GBPJPY was actually the bigger mover, moving over 1000 pips at its worst point in overnight trading. It is important to stress that the nature of a flash crash is that there is a recovery after the initial move, and we have seen that over the course of the trading session with over half of the initial move now retraced. However this gives us a look into the future and shows us that investors are particularly nervous about the stories dominating markets as the US-China trade conflict and overall global growth story confound a hugely volatile start to 2019.
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies