• GBP/JPY +0.7%
• EUR/JPY +0.8%
• AUD/CAD -0.5%

GBP/JPY

Japanese Data Still Weak, Yet Strong: Topping the list of gainers on the day, the GBPJPY cross pair launched off of the 204 support established in the overnight as traders reinitiated carry trades in light of better than expected Japanese growth figures.  Beating estimates on the monthly and annualized comparisons, gross domestic product rose in the fourth quarter leading some to speculate of higher interest rates in the near term.  However, with a lesser known board member reiterating the need for continually low interest rates and the fact that the overall deflator softened further, overall attention turned to higher yields in the U.K. rather than yen growth.  Retracing slightly as we head into the close, the cross pair may have further upside potential after the weekend as the Rightmove report is set to offer further suggestions of stabilization in the housing sector.  Estimated to have risen another 0.3 percent, the report may lend to further optimism in the U.K. economy as stable housing prices may ultimately translate into consumer spending, bolstering the underlying economy.

EUR/JPY

Euro Bulls Enter On Tepid Growth: Rising above the GBPJPY cross counterpart, the EURJPY currency pair rose on further carry trade initiation as expectations continue to mount of rising interest rates in the European region.  Bolstered by preemptive attempts to contain inflation, European Central Bank President Jean Claude Trichet is expected to raise another 25 basis points in two weeks time when policy makers next meet.  This is quite surprising given the disappointing results from the previous weekââ,¬â"¢s German and French data and todayââ,¬â"¢s tepid rise of 0.1 percent in Euro zone industrial production.  Nonetheless, a differential does exist between the two economies offering euro carriers a steady return on interest.  Looking forward, traders would do well to be wary of the slate of economic tidbits scheduled for next week.  Should further indications of Japanese growth appear on the docket, expect rising speculation of increasing interest rates, set aside the occasional comment by government officials.

AUD/CAD

Canadian Dollar Revived: Australian selling took place during the session, visible in the AUDCAD currency pair, as crude oil contracts rose on the day.  Gaining back losses after Wednesdayââ,¬â"¢s better than expected rise in crude stockpiles, contracts on the NYMEX closed in on the $60 a barrel mark as traders took profits from the two session windfall.  The rise in price boosted the Canadian dollar leg of the synthetic as optimism of overall growth and rising interest rates still underpin the current spot price.  Contrary to the underlying major Australian leg that moved higher on the day, the synthetic declined in light of comments made by Reserve bank of Australia Governor Ian McFarlane.  During the Parliamental testimony yesterday, the governor sparked rate speculation when he admittedly said that the next direction for rates would be up rather than down.  Sporting a rate of 5.5 percent already, the Aussie economy may see demand for its currency ramped up should another increase be in the works.

Richard Lee is a Currency Strategist at FXCM.