The Pound was able to make steady gains against the Japanese Yen this week, but investors remained flighty due to high volatility generated by revealed plans on Brexit.
Japanese data out over the week was broadly positive, but failed to lift the Yen against the more active Pound.
Over the current week, the Pound Yen exchange rate has improved considerably, starting at a low of 136.73 on Monday and closing on a high in the region of 141.62 on Friday.
Pound Sterling Rocked by Theresa May’s Brexit Revelations, Chancellor Hammond Offered Stability
The biggest influencer on the Pound of late was a speech from Prime Minister Theresa May, who outlined her plans for Brexit in the face of prior criticism about vague remarks.
May finally confirmed that the UK would be exiting the EU single market, though the Pound quickly rose sharply against the Yen when she also stated that Parliament would be voting on the terms of Brexit before the end deal was finally agreed on.
Chancellor Philip Hammond, as well as Theresa May, offered further reassurance at the World Economic Forum (WEF) event in Davos, where May stressed her desire to keep UK-EU relations on a good footing when it came to trade.
Closing UK news saw retail sales in December drop heavily on the month, while sales on the year alarmingly slowed during what should be one of the busiest months for national sales.
Japanese Yen Demand Limited as Impact of Trump Presidency Assessed
While Japan saw annual machinery orders, machine tool orders and monthly industrial production rise this week, these positive pieces of news failed to secure demand for the Yen.
The greater influence was concern about how incoming President Donald Trump’s foreign policies could negatively impact the Japanese economy; the new President has been labelled as a possible cause of a sharp reversal in Yen demand.
On the flipside, however, Bank of Japan (BoJ) Governor Haruhiko Kuroda has stated that it might be easier to reach national inflation targets if the US economy accelerates as expected under the new administration.
GBP/JPY Exchange Rate Forecast
Next week, Pound Sterling/Japanese Yen exchange rate movement may occur as a result of UK Government borrowing figures on Tuesday, GDP growth rate stats on Thursday and Friday’s GfK consumer confidence score.
From Japan, notable news will consist of an industry-wide activity index on Monday, Tuesday’s trade balance printing and Thursday’s inflation rate results for December.
Forecasts have been thin on the ground for UK and Eurozone results, but the previous UK borrowing figure saw a major deficit figure posted, while consumer confidence dropped to -7.
For the Japanese results, the all industry activity index previously grew by 0.2%, while the national trade surplus was 153bn.
Inflation in Japan was a 0.5% on the year in November, though on the month it remained static at 0%.