Yen

The Japanese trade surplus for May fell 7.6% over the year to JPY366bn although this was slightly above expectations. Exports recorded positive growth which will provide some degree of relief for the Japanese currency, although the immediate impact will be very limited with a focus on global trends.

The yen was little changed on Wednesday ahead of the Federal Reserve interest rate decision with the dollar just below the 108.0 level, while the yen remained under pressure against the Euro.

Following the Fed decision, the Japanese tested all-time lows against the Euro above 169 while the US currency was unable to sustain levels above 108.30.

Sterling

The UK currency tested levels near 1.9750 against the dollar on Wednesday, but was unable to sustain the gains in European trading even with the dollar generally on the defensive. The UK currency weakened to near 0.7940 against the Euro after the Fed decision, but regained ground against the dollar.

The latest CBI retail survey was slightly stronger than expected with a reading in realised sales of -9 in June from -14 the previous month, although expectations were still generally weak.

MPC comments in testimony to the Treasury will be very important on Thursday. The UK currency will gain some support if there is a warning that interest rates may have to increase. Bank of England Deputy Governor Gieve was generally pessimistic over the economic prospects in comments on Wednesday.

The placing of around GBP4bn in shares by Barclays Bank should provide some support to the UK currency as it should reinforce capital inflows.

Swiss Franc

The dollar was unable to hold above the 1.0440 level on Wednesday and weakened following the Federal Reserve interest rate decision with lows below 1.0350. There was further Euro buying support below 1.62 against the franc.

There were no significant domestic incentives during the day with international influences dominant.

Overall risk appetite was still generally firm which curbed short-term support for the franc and there is still a sense of unease over the domestic economic trends.

Source: VantagePoint Intermarket Analysis Software

Australian dollar

There was little change in the Australian dollar in local trading on Wednesday with the currency edging slightly lower. The currency will gain further support from optimism over commodity earnings as prices remain at historically elevated levels. There is also still scope for capital inflows from Japan on yield grounds.

The Australian dollar edged lower ahead of the Federal Reserve interest rate decision as commodity prices came under pressure, but the currency pushed higher following the Fed interest rate decision with a high close to the 0.96 level.

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