GBP/JPY dipped this week as the Yen strengthened in the face of adversity, with the pairing fluctuating between 159.4558 and 152.1735.
‘Panama Papers’ Destabilise GBP
While the start of the week was not crammed full of UK data, the Pound was nonetheless moved notably by the rapidly unfolding series of events triggered by the leaking of documents from Panama. The so-called ‘Panama Papers’ were sourced from Panamanian law firm Mossack Fonseca, which was exposed as having apparently aided countless companies and individuals to evade or avoid tax by setting up offshore accounts or otherwise deceive global taxation authorities.
The implications for the UK were extremely damaging, as it emerged that not only were British Overseas Territories such as the British Virgin Islands and Crown Dependencies like Jersey extremely popular on the list of ‘tax havens’ identified by the papers, but that the Prime Minister’s late father also had some ostensible connection to offshore accounts and anti-tax activities.
The Pound was largely battered by the news and the widening scandal resulted in the resignation of Iceland’s Prime Minister, among others.
Sterling Further Weakened by UK Referendum Controversy
The Pound’s appeal has failed to improve today, with the most recent ‘Brexit’ development proving to be divisive among investors and voters alike.
The news that the government will apparently be spending around £9m on leaflets to promote an ‘In’ vote, while the ‘Leave’ campaign has only been allowed £7m for its own promotional efforts, has dominated headlines and done much to dictate GBP sentiment.
Japanese Yen Strengthens on Implied BoJ Intervention
Unlike the Pound, the Yen has been making steady gains against its peers this week due to the actions of the Bank of Japan (BoJ). In February, the BoJ was in focus when it opted to put interest rates into a negative range in an effort to weaken the Yen to facilitate growth in the country.
Most recently, the BoJ has dropped some major hints about employing further policy measures to try and achieve its goal, and hopes of stability returning to Japan’s economy has raised the appeal of the Yen.
GBP/JPY Exchange Rate Forecast
For the remainder of the week, Pound Sterling/Japanese Yen exchange rate movement may occur as a result of tomorrow’s positively forecast Japanese consumer confidence index score for March and the later UK trade balance figures for the same month (which are expected to show a deficit reduction in two of three fields).
Next week, UK data of interest will be Tuesday’s final inflation figures for March, as well as Thursday’s Bank of England (BoE) interest rate decision for April. Current forecasts are for a rate freeze at 0.50%, which is unlikely to increase the Pound’s appeal.
One of the first high-impact pieces of Japanese news will be Tuesday’s scheduled speech from BoJ official Yutaka Harada. The effect of the speech on the Yen will depend on its tone.
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