FX Update: The safe-haven yen rallied sharply while the Mexican Peso plunged
FX Update: The safe-haven yen rallied sharply while the Mexican Peso plunged precipitously after President Trump vowed to hit Mexico with a 5% tariff and threatened higher tariffs if it failed to do what he considers its part in dealing with surge in immigrants attempting to cross the border into the U.S. USD-JPY dove about 0.8% in making a four-month low at 108.72. AUD-JPY tumbled to a five-month low, as did EUR-JPY. USD-MXN, meanwhile, surged by about 3.5%. The dynamic in currency markets was a reflection of broader risk-off positioning in global markets, which has underpinned U.S. Treasuries and other top-tier sovereign paper while stock markets have turned sharply lower. S&P 500 futures have dropped by 1.2%, which is an outsized move by the norms of the overnight session. The 10-year Bund yield hit a record low. The Goldman Sachs equity analyst team turned negative on their outlook for corporate America for the first time in two years due to deteriorating trade picture. Despite the record nadir in Bund yields, EUR-USD still managed to edge out a two-day high at 1.1156, though analysts expect the Dollar to hold up better than the Euro in the scenario of persisting risk aversion given the attractiveness of U.S. Treasuries, being the highest yielding risk-free investment available, and given the risk of a no-deal Brexit scenario and concerns about the fiscal responsibility of the Italian populist government with regard to the common currency's outlook. Elsewhere, sterling hit fresh trend lows against a number of currencies, as did the Canadian dollar, which dropped concomitantly with fresh 12-week lows in oil prices.