The Pound to Japanese Yen exchange rate has continued to tumble lower throughout this week. Wednesday’s session saw GBP JPY recover from Tuesday night’s four-year-low of 125.07 on hopes of a Brexit debate in UK Parliament. However, as demand for ‘safe haven’ currencies edged back, the Yen strengthened and left GBP JPY trending nearer 126.50.
Pound (GBP) Struggles on Lack of Clarity in UK Brexit Plans
Wednesday’s session briefly gave the Pound some reprieve from Tuesday night lows against most major rivals, as UK Prime Minister Theresa May announced that the government would hold a Parliamentary debate over Brexit concerns.
This was despite previous statements from May that there would be no vote on the government’s Brexit terms, and was initially seen by analysts as a bit of a U-Turn on the matter of MPs discussing Brexit.
However, May clarified later on Wednesday that promising a Parliamentary debate did not mean offering MPs a vote on the terms of a Brexit or on activation of Article 50.
A speech in the afternoon from Brexit Secretary David Davis failed to offer any consolation, as he hesitated to imply that any kind of paper would be published on a Brexit plan, leaving markets to think that there simply was no plan. This, of course, left Sterling weaker on Wednesday evening.
Japanese Yen (JPY) Strengthens as Markets Gradually Return to ‘Safe Havens’
Japanese Yen demand slipped earlier in the week, as markets once again flocked towards risky currencies amid US market stability over the weekend and in the early morning.
With the Yen becoming increasingly correlated to demand for ‘safe haven’ assets and strength in the US Dollar, the Yen weakened as markets favoured riskier assets and the ‘Greenback’ instead.
However, the Yen has begun to strengthen again since Tuesday as the market’s limited risk-correlated rally cooled and markets began to return to ‘safe havens’.
GBP/JPY Forecast: Pair Could Remain Near Lows as Market Jitters Persist
The Pound to Japanese Yen exchange rate is unlikely to make a significant recovery attempt in the near future, as Pound traders continue to remain wary of the British currency amid heated Brexit speculation.
Wednesday’s Brexit talks did little to reassure investors of a post-Brexit United Kingdom. Some analysts suggest concerns have actually worsened due to the British government’s evident lack of a plan.
Sterling may see an opportunity to hold its ground a little better on Thursday if RICS’ September UK house price data beats expectations.
However, many believe GBP is becoming increasingly Brexit and politics-correlated, which could leave the currency weak until positive Brexit news – or at least until next week’s more influential British stats are published.
The Yen is likely to continue to strengthen in the coming weeks as the US Presidential election approaches.
Regardless of the poll performance of Presidential nominees, US markets will become increasingly jittery. As a result, non-USD ‘safe-haven’ currencies like the Yen will see a strong increase of demand.