FX072 TorFX - Japanese Yen Update
Market Update - GBP JPYLast Wednesday's quarterly inflation report put sterling on the back foot, sending it lower against all the major currencies. It wasn't so much the data that hurt, since we already knew that inflation had declined to just 1.1% in September. Gloomy comments by governor Mervyn King kept markets guessing over whether further quantitative easing is in the pipeline. "We have a completely open mind as to whether to do more asset purchases..." was the phrase that sterling took exception to. However, by Thursday the pound was bouncing back as the wider market decided that the comments were designed to avoid any further disappointment should the bank chose to extend the QE programme. That could be symptomatic of the general sterling trend lately. An initial kneejerk reaction to bad news/comment seems to be followed by a swift rebound as investors struggle to find new reasons to sell the pound.
As we noted in our last report, the sterling/yen chart resembles the sterling/US dollar chart because of similar relative weakness of the dollar and Yen this year. The rebound from 140.00 in October gives us reason for optimism here, and the fact that sterling has in a holding pattern for the last few weeks gives added confidence that the next big move should be up. We would revise this assessment if the interbank rate drops below 145.82. In the meantime a break above 153.24 would give sterling another boost, opening the way to the 2009 highs around 163.00.
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Labels: jpy-update
Posted at: 15:47
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