Currency Focus

GBP - I appreciate that the MPC [Monetary Policy Committee] has to control inflation, but a stronger pound performs a similar role in dampening economic activity. The strength of the pound may modestly dilute the need for rates to go markedly higher. However, much will still depend on companies' pricing policies and power, the strength of consumer spending and wage developments.

JPY - There has been a change in stance in Japan with recent comments suggesting that the government is concerned with yen weakness. In light of what appears to the first signs of a sustained campaign of verbal intervention from the MoF in support of the yen, this change (Watanabe departure) looks potentially meaningful. The yen has gained on this (BoJ comments), but it remains far from clear whether this will be sufficient to generate a broader shakeout in carry trade activity. The change in Japanese rhetoric remains very incremental, and BoJ officials have yet to hint that the weaker yen could generate a meaningful monetary policy response