The Pound to Japanese Yen exchange rate ticked higher earlier today following the release of the UK’s latest Manufacturing PMI figures, which saw an impressive rise from 53.6 to 56.1 in December.
GBP JPY currently sits around 144.40 following the release of the manufacturing figures, up slightly from 144.35 earlier this morning.
Pound (GBP) Strengthened by Data
The Pound (GBP) surged against the Japanese Yen (JPY) this morning as the UK’s impressive manufacturing PMI helped to dispel some market concerns over the UK’s economy since its vote to leave the EU as it reached its strongest levels since June 2014.
The rise is largely thanks to the devaluation of the Pound in recent months as the 18% drop in Sterling since the EU referendum helped to make UK exports more attractive to foreign consumers, with companies reporting rising orders in China and India and other Asian markets.
However, the Pound was unable to hold at its best levels and began to decline by the afternoon as economists warned that manufacturing growth was likely to be short lived. Analysts pointed to a drop in domestic demand due to rising inflation, while increasing import costs and the uncertainty of ‘Brexit’ could hinder exports. As Samuel Tombs, chief UK economist at Pantheon Macroeconomics explains;
‘The boost to growth from Sterling’s depreciation will remain relatively modest, because exporters have raised sterling prices sharply and because uncertainty about the UK’s future trade relationships will deter exporters from investing.’
Japanese Yen (JPY) Suffers as Traders Flock to US Dollar (USD)
The Japanese Yen struggled to advance this week as demand has been crippled by the growing strength of the US Dollar (USD) in advance of Donald Trump’s inauguration later this month.
Markets are optimistic that Trump’s ambitious infrastructure and trade plans could help to stimulate the US economy by raising the employment rate and providing a real rise in wages.
Investors are also upbeat about the possibility of further US rate rises later this this year, after the Federal Reserve made hawkish predictions that it could hike rates up to three times in 2017.
Meanwhile the Yen also suffered from thin trading volumes on Tuesday as trading in Tokyo remained closed due to national holidays over the New Year period.
GBP/JPY Exchange Rate Forecast: Will UK Construction PMI also see Surge?
The GBP JPY exchange rate may rise tomorrow if the latest UK Construction PMI improves, while analysts currently predicting that it will slide from 52.8 to 52.6. Should it see a similar rise to today’s manufacturing data then it could cause the Pound to rally once again.
Meanwhile Nikkei will release Japan’s own Manufacturing PMI, which is likely to cause the Japanese Yen to appreciate if it improves from 51.3 to 51.9 as expected.
Looking further into 2017 it is highly likely the Pound will fall as Sterling sentiment increasingly sours in the run up to March when Prime Minister Theresa May is expected to trigger Article 50 of and begin the formal ‘Brexit’ process.