Trading the Sterling, Yen, & Greenback

The Brexit vote has changed the finance world drastically. What’s ahead for the sterling, yen and greenback?

The Sterling – Still A Sinking Ship?

In response to the Brexit vote, many companies and investors are hedging their losses in other trades by continued selling of the sterling. Today we saw a small rebound of strength but it is still struggling to sustain the small gains The present political instability and recent BOE’s decisions have not helped the cause for the sterling rebound. Corporations are thinking of relocating their warehouses from the UK if the decline continues.

The Yen Keeps Rising

On the other hand, the BOJ is facing its own issues. The yen has always been a safe haven currency; whenever the market is unsure investors prefer the yen, and now is no different. The yen has been on the rise since the beginning of 2016 and the Brexit vote has fueled its rise to 18% gain against the greenback. The rally is expected to continue as long as uncertainty exists in other markets.

A strong yen is not good for Japan, but the ambitious Abenomics plan that government had introduced based on fiscal stimulus, monetary easing and structural reforms, is not working. The gradual rise of yen could have been handled by the BOJ but they are yet to intervene. Such a sharp upward trend in Japan’s currency has caused a depreciation of profits of export businesses by 15-21% in this fiscal year. If the trend continues, it won’t be good for automobiles giants such as Toyota and Nissan.

As we can see with the differing reaction of the GBP and JPY, Brexit has left markets in an awkward situation, but the situation dictates that investors follow the trend rather than oppose it. So selling GBP and buying JPY is the way to go until we see a shift in present market sentiment.

The Greenback Holding Steady

On the other hand, the greenback is stable, but the Fed is playing a wait and watch game until it is sure about the impact of the Brexit decision. The results of tomorrow’s U.S. Jobs Report are also on the radar, with investors and the Fed alike watching closely to see if the largely disappointing results from May’s NFP release was an abnormality or validation of a loss of momentum in the U.S. economy.

July will no doubt be an active trading month as the market chugs into a new rhythm post-Brexit vote, and after the initial volatility from Friday’s NFP release is behind us. We look forward to many Forex signal trading opportunities ahead as the month progresses.