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Risk appetite sent USD/JPY up yesterday, but all that has been undone now as caution returns to global markets.
We had noticed yesterday that there was a disconnect between the general ‘risk-on’ atmosphere in markets and the actual statements of politicians, but only this morning’s ‘Financial Times’ story was sufficient to halt the rally. USD/JPY continues to hover above the ¥76 mark, as investors try to assess whether there is any hope of a solution on the eurozone crisis. Some eurozone states are pushing for private creditors to take bigger losses on write-downs of Greek debt, and this raises the possibility that the next tranche of aid money might be delayed.
Tensions remain elevated as markets await the outcome of tomorrow’s German vote on the 21 July bailout agreement. If any part of Angela Merkel’s coalition stages a rebellion then confidence, which is already fragile, could suffer, and this could push USD/JPY lower once more.
