GBP AUD And GBP NZD Exchange Rates Could Climb After Data Reveals Record Japanese Trade Gap

Modified: Wednesday, 20 February 2013 08:07 BST - Written by Minesh Chaudhari

STORY LINK GBP AUD And GBP NZD Exchange Rates Could Climb After Data Reveals Record Japanese Trade Gap

Global appetite for risk had been buoyant during the early part of this week’s session, but the ‘risk on’ trading environment has been endangered by a series of potentially damaging events in the last few hours.

Last night’s session brought worrying news from Japan, with the release of data which showed that Asia’s second most active economy had posted its largest ever monthly trade deficit in January. Analysts’ expectations had not been high for the Japanese import / export figures, with the general consensus being that they would point to a Yen1,379.6bn deficit. However, the actual figure, which showed at an alarming Yen1,629.4bn, proved to be the worst ever showing for this widely-watched figure.

However, on closer inspection the Japanese trade data may not have been as dismal as it initially appeared. The nation’s policymakers have perused an ultra-loose monetary policy stance since last Autumn. Their aim was to sharply weaken the Yen and they have succeeded in their goal. The policy was devised to boost Japanese exports and last night’s numbers showed that this aspiration had been achieved – it was the first time in eight months that the level of exports out of the Land of the Rising Sun had increased. The aggressive weakening of the Yen also had the by-product of increasing the value of imports into Japan, triggering the record deficit.

Elsewhere, yesterday’s report from the Organisation for Economic Co-operation and Development (OECD) which revealed that the world’s leading economies shrank by a combined 0.2% during Q4 of 2012, came as a further blow to risk appetite. Meanwhile in the US, comments from President Barack Obama suggesting that severe job cuts would follow if an agreement is not reached next week to avert a raft of budgetary cuts, provided an additional threat to investor sentiment.

The GBPUSD exchange rate tumbled to a new interim low at 1.5422 overnight. There may be more losses to come for the pair during today’s session if appetite for risk remains subdued. By the same token, any flight to safety by institutional investors could send the GBP AUD and GBP NZD rates higher.

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