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Daily Currency Watch
Overnight comment in brief:
24 July | Yen on the rise
- Disappointing earnings in the US tech sector weighed on Asian stocks. Taiwan was closed due to a typhoon. US equity futures were also lower. The flash composite PMIs in Japan and India both improved, while the Australian composite PMI edged a fraction lower.
- The yen is very cheap on most metrics. It is also heavily under-owned. Both these statement have been true for a long time. The heavy short base increases the chances of a sharp bout of JPY appreciation. Expectations of tighter BoJ policy look to finally registering and investors look to be reducing shorts ahead of the 31 July policy meeting, which has seen USD/JPY drop steadily in recent sessions. The pair sits around 154.60, a 2-month high. Japan’s composite PMI bounced in July to 52.6, from 49.7, led by the service sector, boosting hopes that the lacklustre activity in H1 will give way to a more upbeat H2. JGB yields nudged higher across the curve with a lacklustre 40yr auction weighing.
- German consumer confidence continues to rise and now sits at its highest level since mid-2022. A rise in income expectations was the driver. EUR/USD drifted through Asian trade and sits around 1.0845. GBP/USD pushed lower through Asian trade and sits around 1.2885 as Europe opens.
Read the full report - 24 July 2024
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