Created on January 09, 2025

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Markets are betting against the British Pound on fears the new British government will lose credibility over its economic projections, as happened with the Truss government in 2022.

1. The British Pound is trading firmly lower, reaching a new 1-year low price a few hours ago, as options markets make strong bets against the British Pound due to concerns that the new British government’s economic policy projections will not be reflected by reality, much as happened in 2022 during the short Premiership of Liz Truss. This is a fundamental and sentimental factor working against the British Pound that Forex traders could consider relying upon for a medium to long-term short trade against the British Pound, especially against the strong US Dollar, putting the GBP/USD currency pair in focus.
2. The Australian Dollar is losing value following the release of lower-than-expected Australian retail sales data. The higher-than-expected Australian CPI (inflation) data released yesterday is also helping to weaken the Aussie.
3. The release of FOMC meeting minutes yesterday did not produce any real surprises, with the notable takeaway being the caution expressed by several members about getting inflation down to its target rate of 2%.
4. Global stock markets have mostly traded lower over the past day.
5. The USD/JPY currency pair rose again over the past day to trade at a new 5-month high before giving up some of its gains. This was partly due to residual USD strength backed by a bullish long-term trend, but the immediate cause was more the continuing weakness of the Japanese Yen. Yen weakness is clearly disturbing to the Bank of Japan, which finds itself unable to meet a long-anticipated second-rate hike due to continued weak wages growth. The Bank has warned off Yen weakness but may not be able to do much, as was also the case over recent years, so trend and momentum traders will probably have good reason to be long of this currency pair.
6. In the Forex market, since today’s Tokyo open, the strongest currency has been the Japanese Yen while the weakest currency has been the Australian Dollar. The US Dollar is in a strong bullish trend, and it traded at a fresh 2-year high price last week. The EUR/USD currency pair and the USD/JPY currency pair remain within valid long-term trends, with the bearish move in the EUR/USD looking stronger in recent hours.
7. The US 10-Year Treasury Yield is near a multi-month high and will attract interest from trend traders on the long side. Some CFD brokers offer this to traders, and micro futures are available on the CME.
8. There are no high-impact data releases scheduled for today.

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