GBP/USD and Japan!

Dear Reader,

The theme of the day is Scottish independence. Personally, I think if the vote is YES this could drive GBP/USD under 1.50. If the vote is NO, the pound could go back to 1.70 USD. It is an interesting binary situation with almost equal probability. The market seems to be underestimating the repercussions. Catalunya could be next. Other European countries have minorty issues aswell.

Japan is another interesting story. Some analysts seem to expect an additional dose of Quantitative Easing from the Bank of Japan. I think buyng around 700 bln. USD assets(predominantly Japanese government bonds)per year is enough. People seem to be underestimating the flexibility of the Japanese economy. However, if they do embark on a QE this would bode well for global equity markets.

The San Francisco Federal Reserve Bank paper that market participants are underestimating the inclination and readiness of the Federal Reserve to raise the Federal Funds rate is interesting. The eventual monetary policy tightening or its anticipation could be the trigger for risk assets sell off. We'll see.

Disclaimer: This article is provided solely for informational purposes, and does not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost are the author's and they in no way express the opinion or official position of Bulgarian National Bank!

Conflicts of interest: I may possess some of the securities or currencies mentioned in the blogpost!