UK GDP Downgrade Sparks Pound to Yen (GBP/JPY) Exchange Rate Slump

GBP/JPY Exchange Rate Tumbles after Negative UK GDP Revision

The Pound to Japanese Yen (GBP/JPY) exchange rate dropped by -0.5% today following news that UK GDP has been revised down in Q4 2017.

The year-on-year and quarter-on-quarter readings have both fallen for their second estimates, concerning GBP traders and weakening the Pound.

Business investment in the UK has also lowered demand for GBP, with a flat 0% growth rate being reported for the Q4 quarter-on-quarter reading.

Lower business investment risks major UK projects failing to get off the ground, which could ultimately cause further GDP downgrades in the coming months.

GBP/JPY Exchange Rate Further Damaged by Falling CBI Sales Stats

The Pound to Yen exchange rate (GBP/JPY) has been under constant pressure of late, with Confederation of British Industry (CBI) data further reducing GBP demand.

The CBI has seen a reduction in its reported sales for February, from a 12-point reading to 8 points.

The CBI’s Head of Economic Intelligence, Anna Leach, stated:

‘With labour-intensive businesses such as retailers finding it increasingly difficult to find workers, agreeing a jobs-first transition between the EU and the UK, in writing, by the end of March would provide some much-needed certainty’.

Speculation over BoJ Deputy Governor Nomination Boosts JPY/GBP Exchange Rate

The latest Yen to Pound (JPY/GBP) exchange rate rise has been attributed to trader optimism about recent news concerning the Bank of Japan’s (BoJ) employees.

Current Governor Haruhiko Kuroda has been re-nominated for another term, but there has been greater interest in potential Deputy Governor Wakatabe Masazumi.

Mr Masazumi, a professor at Waseda University, is considered to have ‘reflationist’ attitudes, which could mean more aggressive monetary policy measures in the future.

Japan has long struggled with low inflation rates, so traders are hoping that Mr Masazumi will take an active stance on raising inflation when he speaks in early March.

GBP/JPY Exchange Rate Forecast: Pound to Yen Volatility ahead of BoE Official’s Speech

The Pound to Yen exchange rate may worsen tomorrow, when Bank of England (BoE) official Dave Ramsden gives a speech.

Mr Ramsden, who votes at BoE interest rate decision meetings, could have the effect of devaluing the Pound if he suggests that the UK will continue to struggle with productivity issues in the near-term.

More imminently, the Japanese Yen to Pound exchange rate could rise further when inflation stats for January are announced tonight.

Year-on-year inflation is predicted to rise from 1% to 1.3%. This will be a step closer to the BoJ’s 2% target, and the Japanese Yen is liable to rise in value if the forecast proves accurate.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon