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Pound, Yen Both Poised to Drop

Pound, Yen Both Poised to Drop

UK Prime Minister Boris Johnson has now been placed in intensive care, following an admittance to hospital just a few days prior. For now his duties have been taken over by Foreign Secretary Dominic Raab. While a spokesperson from 10 Downing Street has said that Johnson was moved due to his condition worsening, they also stressed that he was still conscious and the move to an intensive care unit was more of a precaution in case he needed a ventilator.

This news is undoubtedly weighing heavily on traders as the GBP/USD had an immediate reaction, temporarily dropping down to a low of £1.219 against the US Dollar. Therefore it is also very likely to see the Pound continue to drop, depending on Johnson’s condition in the upcoming days.

The GBP/USD pair was stuck in a tight range of 1.2460 - 1.2350, but has finally violated this range on the lower side. It's now driving selling bias in the GBP/USD pair and may lead it's prices further lower towards the next support level of 1.2133. - Anish Lal, BlackBull Markets.

The Yen’s reputation as a safe haven currency is also under threat, as Japanese Prime Minister Shinzo Abe has announced that he will declare a state of emergency in Tokyo, as well as six other prefectures in Japan, in order to stem the outbreak of coronavirus in their country. This news most likely comes as the result of Tokyo and Osaka gaining an increasing number of new infections which cannot be traced.

In an article last week I commented on how there was a sudden rise in cases in Japan following the postponement of the Tokyo 2020 Olympics, and now that figure seems to have risen alarmingly again. For months Japan has had limited COVID-19 cases, avoiding the same situation that other countries have faced. But now the number of cases in the country have crossed 3,500, with 73 deaths.

Last week it also seemed that Japan was unwilling to enter lockdown, just as it had been unwilling to postpone the Olympics. Despite growing sentiment from both the public, as well as from senior health officials that major cities should enter lockdown in order to prevent the spread of the virus, Abe had stated that Japan would not enter a state of emergency just yet, even as he acknowledged that the situation would soon mirror Europe’s if they didn’t.

I also stated that the Yen’s status as a safe haven would be short lived if Japan were to enact such measures, and it seems now that could be the case more than ever, as the USD/JPY pair has moved up recently, with the Yen losing strength against the greenback. The Yen rose to 109.18 against the Dollar in the previous trading session, but is now back at 108.88, with Abe promising that an 108 trillion Yen economic stimulus package would be delivered to the Japanese economy. This is the equivalent of almost $1 trillion USD. This figure, roughly equal to 20% of Japan's economic output, was larger than expected and was enough to ease investors' worries, at least slightly for the time being.

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