The Japanese Yen has hit the headlines as Japan posted its first annual trade deficit since 1980. Japanese exports have declined for a third straight month and concern is growing over the countries financial health. We have seen the Yen weaken by over 3% against Sterling in the last week and by over 4% against the Euro. My own personal opinion on this is that there have been some subtle behind the scenes interventions in rates by Japan to weaken their own currency before this news broke. Japan have intervened in the markets several times overall the last couple of years in short sharp bursts which have then proved to be short lived with the Yen strengthening further. This current move has gradually weakened the Yen over the last 4-5 trading days which could give it a longer lasting effect.
The Euro is still firmly in the headlines as Greece has still failed to reach an agreement with private investors over bond purchases. Its very surprising that the Euro has managed to strengthen so much over the last week with this looming in the background, which suggests to me that the recent gains will probably be short lived and a move weaker in the Euro will reappear over the next couple of weeks as short bets start to enter into the equation again as at current levels the Euro now looks good value to weaken.
Figures out of the UK this morning show UK GDP contracted -0.2% in the fourth quarter of last year. This leaves last year’s growth in the UK at +0.8% for the year which is low and will add further pressure on the Bank of England to introduce another bout of quantitative easing. The UK has the same problem as most of Europe which the markets questioning where growth will come from this year. Hopefully the Olympic Games in London this summer will hopefully provide a welcome boost to the UK economy.
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