February 22, 2024

Pound Rises As UK’s PM Resigns; Yen Intervention Looms

The Pound gained after Liz Truss handed down her resignation at the parliament. Meanwhile, the Yen breached a critical price level of 150 against the USD. Therefore, driving traders to watch out for potential intervention by the Japanese authorities. 

Yen Tumbles Against the Dollar

The 150 level smashed by the Yen was last seen in 1990 during a similar high volatility sequence. However, the currency soon reverted to 149.76. Next, it hit $150.09, then retracted to 149.63 shortly after.

Due to its unstable price action, traders remain highly alert about an intervention. The spreading speculation is that the Bank of Japan and the Finance Minister will secretly intervene. 

Nevertheless, some analysts believe that short-term intervention won’t scale the Yen. Especially since the bank still maintains its minute rate lifts. According to analysts, the only chance the currency has is that BoJ switches its dovish poise. 

Edward Moya, an OANDA analyst, said traders would continue betting against the Yen unless the Fed pivots. Otherwise, the only other solution for the Yen is if the BoJ turns from its low rates style. Instead, the bank maintains a near-zero rate increase.

Meanwhile, markets expect Fed to hike interest rates at its November meeting. They based their opinion on October’s inflation report, which came out higher than expected. As a result, some predicted fund rates would wind up at 5 percent by the end of the year. 

Given the sentiments, treasury yields and the USD edged higher. Hence, pushing the Yen lower against the Dollar.

Japanese authorities reiterated possible Intervention for the Yen on Thursday. The government will have to go in if the currency continues being choppy. 

Pound Jumps As Liz Truss Resigns

After an announcement that Prime Minister Liz Truss is quitting, the Pound recorded gains. Her setbacks started with an unfunded tax-cut scheme which sparked controversy in her party. As a result, she has only spent six weeks as Prime Minister. 

Viraj Patel said the turn of events would only crown the market with uncertainties. However, he added that a stable entity must take over for stability to exist. 

Meanwhile, the Pound surged following the report. It recorded 63% gains after setting at $1.1293. 

Britain’s Interior Minister resigned on Wednesday, given the inability to support Truss’s government. Meanwhile, less than a week ago, Truss fired her Finance Minister, Kwasi Kwarteng. 

However, an S&P Global Market Intelligence revealed that the market is calm. As a result, the CDS has a relief that set it at 38 after ending Wednesday at 40. In September, the indicator went as high as 47 basis points. 

The UK’s mid-cap index slightly gained 1 percent during Truss’s speech. But, afterward, it retraced to 0.6 percent. Britain’s blue-chip rallied shortly as well. 

Investors forecasted that the BoE might implement 100 basis points at its November meeting. 

Elsewhere, the Dollar index fell 0.5 percent to 112.40. Traders opined it was a result of consolidating. The Euro jumped 0.46 percent to trade at $0.9782.

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