Japan Rate Hike

Hi all - i just wanted to know if it would make sense for me to trade GBP/USD (my fav pair) when important news on another pair, such as USD/JPY, is due to come out? I used to believe that any news at all would effect ALL of the majors - but I'm wondering if it would make more sense to trade USD/JPY instead of the GBP. GBP usually has a lot more pip movement, which is why I thought I'd trade it, even though the news will be on japan.

thanks (hope i didn't cause confusion)

Hi awcmon,
i don't think that the possible boj rate hike will have a big
effect on gbp/usd.
useful information about currency correlation can you find here
http://www.mataf.net/en/analysis-correlation.htm

regards

Frank

Excellent link! Thanks Frank!

Best link ever! Thank God for this forum.

thanks Frank

So what pairs are you guys planning on trading for the announcement? Sticking with the USD/JPY? I was thinking if they don't raise rates maybe buying CHF/JPY or GBP/JPY and if they do end ZIRP then short AUS/JPY. Not sure about EUR/JPY. It's been very bullish but analysts on bloomberg, cnbcworld etc have been saying it is going to take a dump for a while. Maybe the end of ZIRP could trigger a major correction. UBS has the PPP for EUR/JPY at 101, the also have the USD/JPY PPP at 90.5.

What is PPP?

PPP is purchasing power parity. They determine price parity by comparing the costs of a basket of equivalent goods. So basically the JPY is very weak compared to what it should be based on PPP because of the zero interest rates for so many years. If ZIRP ends, it should move toward PPP (other factors also involved ofcourse).