Yen weaker on interest rate comments

Tomorrow is the Chinese New Year. We enter the year of the Dragon, a tricky thing to write for someone of my age without making reference to Bruce Lee. In lieu of the New Year celebrations, the Chinese, Korean, Hong Kong and Singapore markets were closed overnight, leaving the markets in relatively tight ranges. However, the Japanese Yen continues to weaken. As you know, Japan has been running with zero or negative interest rates for 14 years and there is every reason to expect an interest rate rise, perhaps even into positive territory, heaven forefend, at some point soon. However, the Bank of Japan’s Deputy Governor, Shinichi Uchida tried to calm that speculation yesterday, stating that any move into positive rates would likely be short lived and not a start of further rises. The GBP/JPY rate is up to JPY 188.50 this morning, a level last seen three weeks ago. JPY 189 is clearly a major resistance level in this pair, so profit taking is likely to bring this back down to a degree. The USD/JPY rate is also elevated but the weakness of the US dollar is keeping this pair down to JPY 149.35.

CAD may come under pressure from jobs report

Canada will release their employment report for January at 13:30 hours today. The forecasts would suggest an improvement in the number of Canadians in work of circa 16,000 but a very slight rise in the unemployment rate to perhaps 5.9%. The December unemployment rate was 5.8%. That number looks quite high when compared to the UK but is historically low. The Canadian unemployment rate has barely dipped below 5% in the last 50 years. Nonetheless, the Canadian dollar has lost a little ground ahead of this data, bringing the GBP/CAD rate back up to CAD 1.70, half a cent higher than yesterday’s low. The pattern for this pair in the latter part of the day will all be driven by the actual data.

Sterling traders braced for a challenging week

The Great British pound has been relatively stable over the last few weeks and we have definitely lacked UK data this week to drive the market. That all changes from Monday next week. Sterling will face a barraged of UK data and some notable data releases from the EU and the US. The UK data comes in the guise of unemployment figures on Tuesday, consumer price inflation on Wednesday, gross domestic product data on Thursday and retail sales numbers on Friday. These will be interspersed with speeches from Bank of England members and will be supplemented by eurozone GDP and US retail sales data. If that isn’t enough to get tongues wagging and deal buttons clicking, then I’m not sure what will make that happen. Sterling starts today in the interbank market trading at USD 1.2620, EUR 1.1710, up to AUD 1.9420 and slightly down against the Kiwi dollar at NZD 2.0590 after ANZ suggested the Reserve Bank of New Zealand could actually raise their base rate in April. We shall see.