Today might end with the biggest Canada-Japan trade of all time.
Well maybe not in financial markets but certainly in the world of sports. The rumor mill is insane right now around baseball megastar Shohei Ohtani and the possibility that he signs with the Toronto Blue Jays.
The two-time MVP is arguably the biggest free agent in baseball history and will surely be the highest-paid one with a rumored number near $600 million over a decade. Toronto is positively buzzing this morning with people tracking private jet flights, sushi restaurant reservations and betting-site odds.
As for the macro implications, they're probably close-to-nil but he would have something of a Taylor-Swift effect and would be a big lift for the country. It certainly wouldn't hurt Japanese tourism.
How about CAD/JPY?
The shorts have certainly had their moment as the yen surges this week. The pair broke down yesterday along with every other yen cross. The pair broke through the 200-day moving average at 105.19 but has since rallied back above it.
As crazy as the baseball rumor mill is right now, I expect the chatter about Bank of Japan Governor Kazuo Ueda to be even crazier around December 19. The market is pricing in a 17% chance of a hike despite today's dismal GDP number.
I think falling oil prices, the strengthening yen and a weakening economy ultimately keep the Bank of Japan from any significant hikes. They may wish to end negative rates and yield-curve control while the market will tolerate it but I see dwindling chances of a genuine rate hiking cycle.
That should help to lift CAD/JPY in the longer term but for now, it's all about flows as an epic yen-squeeze has been unfolding.
