Nonetheless, despite internal domestic concerns regarding inflation, global investors remain attracted to the high short-term base interest rate at 5.50 percent. The pound has been a popular leg in the global carry trade, as investors short the yen and buy the pound. Currently, pound/yen (GBP/JPY) is trading about 241.25, a gain from early March levels around 222.00 (Figure 3). With Japanese rates at 0.50 percent, the short yen/long pound play is likely to remain a profitable trade over the next quarter as interest rate expectations remain high, according to Powell.
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