The Pound Japanese Yen exchange rate has declined sharply since Tuesday after trading rather flat at the start of the week.
The pairing experienced a low not seen since the first half of 2013 today as fresh Brexit concerns were triggered by the halting of withdrawals from three major open-ended commercial property funds.
Monday’s woeful UK construction PMI print of 46 did little to damage the pairing at the time, with the rate remaining around the 136 mark over the course of the day before declining as the week progressed.
The Bank of England’s July financial stability report for the UK inspired Sterling losses as it branded the economic outlook as ‘challenging’.
However, GBP/JPY losses for the pairing have been muted by the likelihood of a near-term Bank of Japan (BoJ) rate cut.
At time of writing the Pound Japanese Yen exchange rate traded at 130.16 after declining over 0.70% during today’s session so far.
Pound Wounded by Foreboding BoE Report, Commercial Property Funds Halting Withdrawals
The Pound has been left adrift in the forex market since the UK’s decision to leave the EU gutted it, with the currency slumping more than 10% across the board on the announcement of the results.
The currency has only seen further declines as the full consequences of the decision begin to come to light and real-word concerns start materialising. Just last night a third major commercial property investment fund had to cease redemptions.
Earlier in the week, the Bank of England’s financial stability report also took its toll on demand for the Pound as it outlined key areas of concern moving forward in the post-Brexit economic landscape. A clear cause for concern was the widening current account deficit as it relies on a constant inflow of foreign capital to keep it afloat, but record levels of uncertainty are keeping investors overseas.
Yen Continues to Find Support as Brexit Uncertainty Remains Rife
Forecasts that the Bank of Japan have been eying a near-term rate cut in an attempt to devalue the Yen have kept the currency’s gains capped somewhat in recent days, even as safe-haven demand remains high.
However, over the course of today’s session we have seen a 1.32% boost for JPY/GBP as well as an over 0.70% increase in both JPY/USD and JPY/EUR.
Japanese corporate profits continue to be stifled as a result of the overvalued Yen, making the BoJ keen to devalue the currency. However, when the BoJ previsouly cut rates into the negative, Yen demand bizarrely surged 4% in a sign that the market may no longer take cues from the Japanese central bank.
GBP/JPY Forecast to Depreciate Further, But BoJ Keen for Yen Devaluation
The Japanese Yen is likely to encounter further support from Brexit-based uncertainly for the foreseeable future. The latter half of this week also holds a treasure trove of Japanese ecostats, including the Japanese leading and coincident indexes.
The leading index functions as an overall indicator of impeding economic performance and is expected to print at a favourable 100. The coincident index functions similarly but in regards to business conditions, the index is expected to drop slightly but still print at a very healthy 110.2.
From the UK, there are three reports to be aware of on Thursday. Industrial and manufacturing output year-on-year for May is to be released and is likely to show the pre-Brexit economic downturn. A NIESR GDP estimate is also set for release that will likely place further negative pressure on the Pound if it proves to be dire.
The Pound Japanese Yen exchange rate is expected to slide further until the UK can step-out from under the economic shadow of the Brexit.