The current week has seen the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate make slow yet steady gains. While the Pound has been successively bolstered by economic publications, the Yen has been blighted with lacklustre data and the resignation of a major governmental figure.
To summarise Sterling’s fortuitous movement, its lowest rate against the Yen was 167.0442 while the GBP/JPY high point was a rate of 170.3988.
Pound Sterling Initially Softened by Google Tax Uproar
The Pound’s entry into the week was a dramatic one, as the UK currency tanked on Monday due to news emerging over a recent tax deal struck between tech giant Google and the UK government. Although Chancellor George Osborne was highly satisfied that a £130m payment had been extracted for the period going back to 2005, critics were quick to claim that the corporation actually owed billions and saw the smaller figure as a ‘sweetheart deal’ that humiliated HMRC’s efforts.
The issue was compounded by fluctuating shows of support from PM David Cameron for Osborne’s announcement, although by Tuesday the Pound appreciated somewhat due to Bank of England (BoE) Governor Mark Carney giving a consistent, coherent response to the Treasury Select Committee during a session of questioning.
Today, the Pound’s gains can be attributed to the as-forecast Q4 GDP figures for the UK, although the positivity of the headline figure appears to have masked the fact that UK construction is currently in a state of recession and the country on a whole is heavily reliant on the services sector.
Japanese Yen Softened by Fed Rate Freeze, Retail Figures and Resignation
The Japanese Yen has moved on a similarly tumultuous course this week, though the slip against the Pound reveals that GBP ultimately won out.
The first blows came on Wednesday, when the Federal Open Market Committee (FOMC) announced no US interest rate hike until March at the earliest. Given the interlinked nature of the Yen and risk appetite, heightened demand for higher-risk assets led to a softer Yen.
This news was shortly followed by Japan’s annual Retail Sales figure for December, which came in at -1.1% instead of hitting 0.2% as forecast.
Finally, the Yen was rocked by the recent news that Economy Minister Akira Amari will be resigning amid a storm of allegations accusing him of bribery. Nobuteru Ishihara, Amari’s successor, is expected to keep the affairs of the Japanese economy at a ‘business as usual’ level.
Future GBP/JPY Exchange Rate Forecast
For the remainder of the present week, Pound Sterling/Japanese Yen exchange rate movement may occur as a result of tonight’s Japanese Inflation and Unemployment Rate data for December, along with tomorrow’s Bank of Japan (BoJ) Interest Rate Decision.
At the time of writing, forecasts were for an increase from 0.2% to 0.3% for the inflation rate, but a stagnation at 3.3% for the unemployment figure had also been predicted. With regard to the interest rate decision, no change is expected from the current 0%.
Looking ahead to the week to come, the largest respective UK and Japanese economic announcements will be a speech on Wednesday from BoJ Governor Haruhiro Kuroda and the UK’s BoE interest rate decision scheduled for Thursday.
The content of Kuroda’s speech is currently unknown, while the general consensus at present is that no UK interest rate hikes are likely for the next few months at least.