Global Currencies: Pound Strong, Yen Weak

Sterling has been range-bound against the US dollar for most of the past four years, and although we have a short-term bullish bias towards cable, it still faces stiff resistance in the US$1.63/GBP area.

However, the British pound continues to look particularly strong against other key currencies. We initiated a bearish view on the Canadian dollar versus the pound in our Americas asset class strategy in September at CAD1.6490/GBP, and it is up 3.1% thus far, with much further to run.

Against the yen, sterling is up by about one-third since 2012 and still looks very good technically following a break of resistance at JPY160.00/GBP, with a significant amount of room to run before reaching JPY200.00/GBP. Currently at JPY101.00/US$ after breaking through key support at JPY98.00/US$, the yen is set for a further move lower to JPY105.00/US$, in our view.

While the Abenomics policy mix is likely to bring with it negative consequences eventually, Japanese stocks are poised to take a leg higher for now. In accordance with the yen's close correlation with Japanese equities, the Nikkei is testing 20-year trendline resistance that comes in around 15,500, a break through which would set up a move to the 2007 high above 18,000.

All our financial market views, including our asset class strategies, are available to subscribers at Business Monitor Online.

This Week's Trivia Question

Last week's question was designed to coincide with the 50th anniversary today of the assassination of former US President John F Kennedy, and was as follows: Eight months before the Kennedy assassination, gunman Lee Harvey Oswald had attempted to kill a former public figure. Who was that individual?

The answer is retired major-general Edwin Walker, a former military officer who embarked on a political career in the early 1960s and was apparently viewed as a rightwing extremist by Oswald.

This week's question retains the theme of assassination, and also the same era: Three weeks before Kennedy was assassinated, the president of a US-friendly country was ousted in a coup that led to his violent death. Who was that individual? (Hint: the US would become increasingly involved in that country's affairs after Kennedy's death.)

This blog is tagged to:
Sector: Country Risk, Financial Markets
Geography: Global
Tags: GBP, JPY, CAD, Nikkei, pound, yen

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