Forex Intraday Round-up: British Pound Gains on Euro Sell-Off
**The Japanese Yen Erases Earlier Gains Despite Lack of Policy Changes from BoJ**
After gaining against the dollar in the early hours of trading, by mid-day the yen once again weakened against most major currencies. At 12.21 GMT the USD/JPY was trading in positive territory at 81.53/55 or 0.15 percent higher compared to yesterday’s closing price. The pair fluctuated repeatedly as rampant speculation ensued following the announcement that the Bank of Japan will be keeping its policies unchanged for now. According to Pete Jackson from FXstreet.com, resistance is expected just above 81.75 and again at 82.00. The currency pair touched a session high of 81.58, just a pip below the yen’s seventh month low of 81.59 reached yesterday.
Bank of Japan’s Governor Masaaki Shirakawa said today that the opposition party’s proposal to weaken the Japanese currency is unrealistic. According to news agency Bloomberg, Mr Shirakawa told reporters in Tokyo that he wants people to respect the BoJ’s independence and also reiterated that money printing can be hazardous for the economy.
**The Euro Mixed Following France’s Downgrade and Spain’s Debt Issue**
After falling 0.3 percent to $1.2782, the euro regained some ground, while still remaining in negative territory. At 12.40 GMT the EUR/USD pair was trading at 1.2796/99 or 0.12 percent lower. According to BBH analysts, the market didn’t take Moody’s downgrade of France’s debt rating very seriously since S&P had already downgraded the country to an equivalent level in January. What is more concerning to investors is that the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) may also suffer with the French downgrade.
Nevertheless the EUR/USD pair managed to recover some losses after the Spanish authorities sold almost €5 billion (£4.02 billion), more than the expected €3.5-4.5 billion, of 12-month and 18-month Letras. Benoît Cœure said today that although a significant improvement can be seen in financial markets in Europe since July, the European situation still remains very similar to what Japan experienced in the 90s.
**The Sterling Gains as Investors Hedge Against Euro Troubles**
!m[The Yen Remains Weak as Investors Speculate on December Elections](/uploads/story/855/thumbs/pic1_inline.png)As reported by Reuters, on Tuesday the sterling edged higher against the euro and the dollar on safe-haven bids. At 13.05 the GBP/USD was trading in positive territory at 1.5913/15, while the EUR/GBP was down 0.13 percent to 0.8044/46.
The GBP/USD reached a session high of 1.5938 but couldn’t establish ground above the 1.5935 resistance level. If it beats that, upward resistances are seen at 1.5980 and the psychological level of 1.6000. On the downside the sterling could receive support at 1.5890, 1.5880 and 1.5850.
The sterling’s rally is not sustainable according to most analysts. “Ratings in the core are back under pressure with France in the spotlight. That has traditionally provided sterling with some support as it is seen as a safe-haven from Europe,” opined Ian Stannard, head of European FX strategy at Morgan Stanley, as quoted by Reuters. “Given that move was widely expected as far as France was concerned, it shouldn’t have too much of an impact except some support for sterling in the very near term. Bigger risk events are on the horizon for sterling so any rebounds would be temporary,”
According to Mr Stannard the current bounce in the GBP/USD could reach 1.5950-1.5960 before coming back under pressure.