The forex market has been choppy, but the risk to positive news-flow surprises suggests the British Pound’s upside now looks asymmetric.

The UK equity market has been one of the worst-performing major global markets since the Brexit referendum in June 2016. And with the UK at the head of the G-10 class on the vaccine rollouts, Sterling is still in demand as FX trader continue to anticipate real money adjustments piling back into under-investment UK themes that have been in the tank since Brexit.

And the bar for EUR news flow to surprise positively (vaccine, restriction lifting, rebound) is now considerably lower than that for USD (already high vaccination rate, fiscal stimulus priced), and EUR remains a medium-term conviction long.

All the focus has been on 1.39 breaching in GBPUSD, but its the sneaky climb in USDJPY that is starting to capture the market attention.

And it’s the first time in a while since the street is taking out USDJPY topside via both vanilla and leveraged structures. All this is occurring after a leaked monetary policy report suggesting that the Bank of Japan (BoJ) might take measures to reduce hurdles to more negative rates by revising its three-tier current account structure.

The Malaysian Ringgit holds close to 2-week highs supported by oil prices, vaccine optimism and a gradual reduction of the MCO which seems to be on the cards sooner than later.

But the local note will face a keen foreign investors test as the Malaysian government will auction 2 billion 2040 MGS to settle on Feb 18, 2021, which will be a good gauge of foreign investor uptake for local debt amid economic headwinds.

I would expect the auction to be well received given global investors’ insatiable chase for yield.

Gold’s woes persist

Much of the gold market current woes are attributable to rising US yields. The absence of realized inflation on the ground hurts the view also after last week’s US CPI miss as implied or break-evens inflation can only carry the long gold narrative for so long.

Forex market analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi