Yen Crosses Jump on Debt Ceiling Deal

A six week debt ceiling extension was all it took to send US stocks to the best day in 9 months. Yen crosses also made gains but FX was more cautious than the stock market. There is no market-moving data on the schedule in Asia. 

Republicans floated a plan to raise the debt ceiling until Nov 22 in exchange for 'negotiations' on long term spending and rules that will ban accounting tricks to skirt future debt ceilings.

The outsized equity reaction hides some clear concerns. First the government shutdown has not been addressed at all and Harry Reid said there will be no negotiations until it's reopened. Second, Democrats have yet to formally respond and they will surely be looking for more.

Headline risks will be extremely high in the day ahead.

The reaction to initial jobless claims was instructive to what the next few weeks may look like. The headlines were soft but skews in the data, including from the shutdown made the numbers unreliable. USDJPY dropped then quickly rebounded to a session high as traders took a second look. Yesterday's FOMC minutes were a similar headfake and make us wonder - should we be fading all moves on US data until the shutdown skew is gone?

One other thing stood out in today's trading: the Canadian dollar was wholly unable to rally on good news and underperformed AUD and NZD. That points to more problems for the loonie. Meanwhile, the S&P 500 posted a classing bullish morning star pattern and AUD/JPY continued send positive signals.