The past week has seen the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate fluctuate wildly in response to economic developments, although the ultimate outcome was a rise from a low of 164.0680 to a high of 170.1601.
BoE’s Carney Authored Sterling’s Downfall Last Week
The principle reason that the Pound crashed to its low point against the Japanese Yen last week was that Bank of England (BoE) Governor Mark Carney made an uncharacteristically direct statement and informed economists that no interest rate hike would take place for the indefinite future. The bluntness of Carney’s decision sent the Pound into a freefall, both against the Yen and virtually all of its other rivals.
Thanks to some forecast-beating UK borrowing results for December, the Pound managed to claw back its losses against the competition, but for the most part remained in a softened state.
Yesterday saw little of benefit take place for the Pound, due to the news emerging that Google has apparently only paid a fraction of the actual amount owed in back-taxes to the UK government. The incident has sparked a debate over the potential for companies to exploit legal loopholes and is only likely to gain more attention as back-taxes from Amazon and Facebook are also due.
Opposite Result Today as Pound Sterling Boosted by Carney Comments
By contrast to last’s Tuesday’s Sterling slump caused by a comment from Carney, today has actually seen the Pound appreciate against a number of competitors due to the answers given by Carney at a Treasury Select Committee.
Having been asked about potential ‘Brexit’ implications as well as the likelihood of his staying on for the entirety of the 8-year term, Carney has remained cool-headed and ostensibly upbeat about the UK economy in 2016.
Japanese Yen Destabilised Last Week by Disappointing Domestic Data
While the Pound was only softened by one major negative event last week, the Yen was weakened on every day due to its abundant economic publications providing little joy.
Monday saw Industrial Production slip on the Month, Tuesday brought a decline from 9 to 6 in the Reuters January Tankan Index, Wednesday saw a slide in Foreign Investment and Thursday saw a now-familiar slide in the All Industry Activity Index, which shifted from 0.9% to -1%. Topping this negativity off was Friday’s Nikkei Manufacturing PMI Flash which fell from 52.6 to 52.34.
Over the weekend, minor relief was granted by a supportive December Trade Balance outcome.
Today, no direct Japanese data has been released, therefore the -2.35% decline in the Nikkei market has been the only contributing factor to the Yen’s devaluation.
GBP/JPY Exchange Rate Forecast
For the rest of the week, Pound Sterling/Japanese Yen exchange rate movement may occur as a result of tomorrows positively predicted Japanese December Retail Sales, Thursday’s Japanese Inflation Rate and Unemployment Rate stats for the same month and Friday’s Bank of Japan Interest Rate Decision. No change is expected for Unemployment or the Interest Rate, but Inflation is expected to have fallen from 0.3% to 0.2%.
The most notable UK publication will be Thursday’s Q4 annual GDP result, which has been forecast to fall from 2.1% to 1.9%.