httpvh://www.youtube.com/watch?v=93yVG_FsAv8

In a rare moment of cooperation the G7 agreed to come together to sell JPY yesterday in order to weaken the currency. This has seen the USDJPY rate climb back above the 80 level in the short term and will hopefully have the effect of dissuading speculators from betting on further yen strength. A strong currency is the complete antithesis of what Japan needs at the moment with industry needing a full order book once plants are back on line; a feat that would be all the more likely if the yen was weak as opposed to at all-time highs. This intervention will continue over the course of the day and, probably, the coming week in order to save Japan and global growth.

Overnight we have also seen the UN finally vote through a resolution to secure a “No Fly” zone over Libya and to conduct air strikes against Gaddafi’s troops. The reaction to this was to sell risky assets with oil rising back to the $116 a barrel mark while equity markets slid supposedly on the fear that this will extend conflict in the region. Whether the measures are too late remains to be seen however France have said that operators could start this morning. Most of this reaction was overawed by the intervention news however.

Sterling crosses stiffened a bit yesterday as the Bank of England inflation conditions showed that the British public is becoming increasingly worried about inflation. Interest rate expectations have slipped globally since the Japan quake and the Libyan conflict however as growth has suffered as a result of both. Some analysts have now switched back to an August rate rise here in the UK having brought them in to May after the UK inflation report.

Some of you may have been slightly surprised by the GBPEUR rate being below 1.15 this morning but we believe this is mainly down to the intervention. The Europeans have intervened to buy EURJPY while the BOE and FED have not done so yet. We think this euro will weaken come lunchtime and doesn’t form part of a long term trend change.

Latest exchange rates at time of writing