GBP and JPY have weakened notably – Westpac

Sean Callow, Research Analyst at Westpac, suggests that as for the currencies that have moved the most over the past week, both have weakened notably: GBP and JPY.

Key Quotes

“The pound fell to lows since 1985 after UK PM May told the Tory conference that formal Brexit negotiations would commence no later than March 2017. A little more mysterious is the surge in USD/JPY, printing 1 month highs. A bounce in US yields (partly on the ECB story) has certainly helped, more so than any Japan-specific news.

But the scale of the move has surely been boosted by unwinding of spec positioning. CME data showed that in response to the BoJ’s Sep meeting, leveraged funds extended their USD/JPY shorts to the largest net position since March 2008. So it looks like a nasty short squeeze, but only after short USD/JPY has been one of the best G10 trades of 2016.”