Last week the Pound Sterling to Japanese Yen exchange rate moved from a low of 188.6248 to a high of 191.9401. Today, the currency pair was trading in the region of 191.3240. The Japanese Yen managed to move higher against the Pound and peers like the US Dollar following the release of better-than-forecast Japanese Gross Domestic Product (GDP) data.
The GDP report released by Japan’s Cabinet Office showed that the Asian nation’s economy expanded by an annualised 3.9% in the first quarter and by 1% on a quarterly basis. The figures beat economist forecasts for a gain of 0.7% and 2.7% respectively. The strong report confirmed the Bank of Japan’s view that a sharp rise in capital investment by companies would allow the economy to recover strongly from last year’s recession. A weak Yen has also been a major aid to the nation’s exports.
The data follows positive comments made over the weekend by government spokesman Yasuhisa Kawamura, who said that the Japanese economy was returning to a strong growth orbit. Also supporting the Japanese Yen was a separate report which showed that April’s current account balance increased to 1.3 trillion Yen, the rise was the tenth consecutive increase.
As the week progresses the Yen could advance further if upcoming consumer confidence and machinery orders data come in positive. Some economists are warning however, that optimism could be misplaced as they predict that machinery orders will have fallen by 2% in April. April economic indicators, in particular household spending, suggest that consumer demand remains shaky. Household spending fell 4.6% in April from the previous year, the fastest annual decline since March 2011, when a powerful earthquake and tsunami stuck the country.
The Pound Sterling, meanwhile, was softer against peers including the Japanese Yen due to a report published by the Confederation of British Industry (CBI). The group now expects the UK economy to expand by 2.4% this year and by 2.5% next year, down from its previous forecasts for 2.7% and 2.6%. The main cause for the growth cut was the uncertainty being generated by the Greek debt crisis and the escalating debate on whether the UK should stay or leave the European Union.
The main data release due this week for the Pound will be Wednesday’s Industrial and Manufacturing production reports.