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9 Apr 2013
Fundamental Morning Wrap: Yen leads the way this morning
FXstreet.com (Barcelona) - This mornings institutional research has seen a primary focus on Japanese developments, with USD/JPY coming within touching distance of the hallowed 100.00 level overnight, posting a high at 99.66. UK data has come under inspection this morning too, with the effects of a weaker Pound being examined, while in the Eurozone, analysts note that the currency has gained support from the search for yield, especially from Japanese investors following the recent BoJ easing statement, and the poor US data which indicates that a QE exit is not on the cards just yet.
JPY
Danske Bank analysts note that USD/JPY has got 100.00 in its sights and traded as high at 99.66 overnight. Lee Hardman of BTMU notes that the announcement of the BoJ’s aggressive monetary easing plan has also encouraged renewed risk seeking behaviour by global investors as well as yen weakness. Jim Reid of Deutsche Bank notes that recent JPY weakening is instigating debates on what effects to expect on surrounding economies. Additionally, he adds that the aggressive easing has seen crushed yields, spurring a flurry of activity in domestic JPY credit markets. He adds that the Nikkei is reporting that a number of Japanese companies are “rushing to issue JPY bonds” to take advantage of the recent compression in credit spreads and the low bond yields in the wake of the BoJ’s announcement last week, similar to a similar pattern seen in the US. UBS strategists Gareth Berry and Geoffrey Yu note that Japan's Finance Minister Aso said that the yen is still in the process of correcting. To them, this signals the government is not troubled by the latest wave of yen selling which took USD/JPY to a new multi-year high of 99.67 overnight and is also the clearest sign yet that Japan would be willing to see the yen fall to below 100 against the dollar.
GBP
The BAML Global Commodity Research Team note that the UK current account remains a structural headwind for GBP and the construction of the UK´s current account implies that this headwind could persist for some time. Therefore, they feel that pressure on sterling is likely to be symmetric over the coming months. During periods of cyclical weakness, sterling is likely to be sold more heavily, than compounded to buying during periods of cyclical strength. James knightley of ING notes that UK Industrial Production has jumped 1% MoM in February this morning, while the soft PMI for March suggests that this component is going to struggle to improve in March, but sterling weakness may support new orders.
EUR
Lee Hardman of BTMU notes that the Euro appears to be benefitting from the renewed search for yield
amongst investors attracted by the higher yields still on offer in the Eurozone, which has resulted in a modest tightening in Eurozone credit risk premium over the past week and most likely reflects the ongoing easing of concerns over Cypriot fallout. Danske Bank analysts believe that EUR/USD has moved higher as markets are scaling back expectations of a Fed exit from QE this year.
JPY
Danske Bank analysts note that USD/JPY has got 100.00 in its sights and traded as high at 99.66 overnight. Lee Hardman of BTMU notes that the announcement of the BoJ’s aggressive monetary easing plan has also encouraged renewed risk seeking behaviour by global investors as well as yen weakness. Jim Reid of Deutsche Bank notes that recent JPY weakening is instigating debates on what effects to expect on surrounding economies. Additionally, he adds that the aggressive easing has seen crushed yields, spurring a flurry of activity in domestic JPY credit markets. He adds that the Nikkei is reporting that a number of Japanese companies are “rushing to issue JPY bonds” to take advantage of the recent compression in credit spreads and the low bond yields in the wake of the BoJ’s announcement last week, similar to a similar pattern seen in the US. UBS strategists Gareth Berry and Geoffrey Yu note that Japan's Finance Minister Aso said that the yen is still in the process of correcting. To them, this signals the government is not troubled by the latest wave of yen selling which took USD/JPY to a new multi-year high of 99.67 overnight and is also the clearest sign yet that Japan would be willing to see the yen fall to below 100 against the dollar.
GBP
The BAML Global Commodity Research Team note that the UK current account remains a structural headwind for GBP and the construction of the UK´s current account implies that this headwind could persist for some time. Therefore, they feel that pressure on sterling is likely to be symmetric over the coming months. During periods of cyclical weakness, sterling is likely to be sold more heavily, than compounded to buying during periods of cyclical strength. James knightley of ING notes that UK Industrial Production has jumped 1% MoM in February this morning, while the soft PMI for March suggests that this component is going to struggle to improve in March, but sterling weakness may support new orders.
EUR
Lee Hardman of BTMU notes that the Euro appears to be benefitting from the renewed search for yield
amongst investors attracted by the higher yields still on offer in the Eurozone, which has resulted in a modest tightening in Eurozone credit risk premium over the past week and most likely reflects the ongoing easing of concerns over Cypriot fallout. Danske Bank analysts believe that EUR/USD has moved higher as markets are scaling back expectations of a Fed exit from QE this year.