Last year’s theme in the currency markets was the “tale of two trades”, namely risk-taking or risk-aversion. However, I think this year is going to prove to be different in that I think we’re going to see some of the correlations we relied on last year break down as individual currency fundamentals are going to take a more prominent role in investor sentiment.
This morning, we are seeing Japanese yen (JPY) strength for the second day in a row, up most notably against the British pound (GBP), the US dollar (USD) and the Euro (EUR). The prevailing thought is that the yen moved down too quickly and that we are seeing a technical bounce. There’s also some talk of Japanese company currency repatriation of overseas profits, as well as recent strength in the Nikkei Index. I’m not a huge fan of trying to ascribe a “reason” to why every little move occurs so let’s just say that yen buying was “overdue”.
Also we are seeing weakness in the British pound as there is speculation that the Bank of England may increase its quantitative easing to keep borrowing costs low. This could pose a problem as most central banks are talking about exit programs from accommodative monetary policy, yet the BOE is talking about extending it. As a result, GBP/JPY is the biggest loser, currently -1.15%.
Be sure to keep a close watch on world markets as this year could prove to be more difficult than the old “US dollar down, everything else up” trades some have gotten so used to. That’s why its really important to have a firm grasp of the fundamentals and what drives certain currencies.
If you’re not sure how the market works or what causes currencies to move, then I suggest you check out our affordable, on-line currency trading courses! Spending a little bit now to get educated will pay enormous dividends down the road! If you want to learn to trade the forex markets, then there is NO better value than our courses! Guaranteed!
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