‘Brexit’ concerns and bets the upcoming EU referendum will result in the UK voting to leave the EU saw the GBP/JPY exchange rate drop from 161.3451 to 154.9244 last week.
‘Brexit’ Bust-Up Dictated Majority of Sterling Movement Last Week
The Pound fared poorly against the Japanese Yen and most of its other usual rivals last week, mainly on account of UK Referendum developments spilling out of the political theatre and panicking investors in the UK currency.
The most dramatic drop in the Pound’s appeal took place on Monday, when London Mayor Boris Johnson announced that he would be campaigning for a ‘Leave’ vote in the UK Referendum. Considered by many to be the second-most influential figure in UK politics, Johnson’s supposed ‘defection’ from the PM’s pro-EU mantra sent the Pound into a freefall against the majority of its peers.
Pound Sterling Appreciates Today after Potential Shift of ‘In’ Campaign Tactics
While the UK has only been graced with respectable domestic data today, the real development has come on another ‘Brexit’ scare. The government put out a report that it would take an estimated 10 years to take the UK out of the EU in the event of an ‘Out’ vote, which immediately provoked derision from the ‘Leave’ campaigners, who saw it as a scare tactic.
More constructively, however, Scotland’s First Minister Nicola Sturgeon, an ‘In’ campaigner, urged the PM to shift his focus from potential downfalls from leaving to potential gains from staying.
Japanese Yen Advances on BoJ Interest Rate Talks despite Conflicting Message
The Japanese Yen peaked on Wednesday when Bank of Japan (BoJ) board member Takahide Kiuchi stated that leaving interest rates negative could do more harm to Japan’s economy than good. Naturally, this increased expectations that the nation’s interest rates could be hiked in the future, at least to a 0% level.
Today, the Yen has also advanced strongly against its rivals, although this comes after a virtually opposite speech from the BoJ’s Governor Haruhiko Kuroda regarding the national interest rate.
Speaking in the wake of the weekend’s G20 summit of global financial leaders, Kuroda asserted that the BoJ would continue to cut the rate if that was a requirement of hitting the desired 2% inflation rate. Although negative interest rates are obviously injurious to some, the delivery of such a drastic statement implies that the BoJ is extremely engaged with the issue of bolstering national growth to a sufficient level.
This Week’s GBP/JPY Exchange Rate Forecast
For the present week, Pound Sterling/Japanese Yen (GBP/JPY) exchange rate movement may occur as a result of the UK’s manufacturing, construction, composite and services PMIs, as well as Japan’s contributions of the labour cash earnings and a speech from BoJ Deputy Governor Hiroshi Nakaso.
Japan’s earning’s figures on the year in January, due to be announced on Friday morning, are expected to rise from 0% to 0.4%.