[Calxy]

Japan FM Fujii's latest comments on the yen suggest less conviction on the merits of a strong yen “Foreign-exchange rates should be determined by the state of a nation’s economy, that’s what’s natural, .... to answer such a leading question [on the merits of a strong yen] would label me as a supporter of a strong yen.” Earlier comments had suggested that the FM might endorse a strong yen.

GBP: More gloom
GBP sold off overnight, following an article in yesterday's Daily Telegraph, which reported that Lloyds Bank had failed the FSA's stress test. That would be a modest GBP negative but the effects could be amplified if the public finances data, out this morning, disappoint. Prospects for the UK banks and public finances are intimately linked and both remain at the fore of investors' concerns about GBP. The extent to which credit is reaching the UK household and SME sectors is crucial to prospects for QE and the possible reduction of the interest rate paid on deposits at the BoE. Some traders are still medium-term GBP bulls but the GBP sell-off could easily go further.