The British Pound to Japanese Yen exchange rate surged on Thursday as UK markets looked forward to the publication of a Brexit ‘white paper’ from the UK government as well as potential trade talks between the UK Prime Minister and US President Trump. GBP/JPY trended at above 144.30 – its best levels since the first week of January.
Pound (GBP) Benefits from UK Trade Hopes
Sterling has advanced consistently since the UK Supreme Court’s decision to support a High Court ruling that Article 50 must be activated following the ratification of Parliament rather than just by the UK government.
After the ruling was upheld, UK Prime Minister Theresa May confirmed that a Brexit ‘white paper’ would be published for MPs to scrutinize in order to make the Parliament vote process smoother and keep the Brexit on track for its March start date.
It was also confirmed that May would be the first world leader to meet with new US President Donald Trump since he took office.
Markets are hoping the meeting this coming weekend will see May talking post-Brexit trade with Trump. Traders are especially excited about comments for a special relationship between the two nations.
Japanese Yen (JPY) Slips on US Trade Concerns
As the first week of the US Trump Presidency affected markets around the world, Japanese markets are growing concerned that the US may be gearing up for a trade war against Japan.
President Trump fully pulled the US out of TPP talks this week and has indicated that the US buys more from Japan than Japan buys from the US. Japanese economists are growing concerned that trade relations between the two major economies could suffer under the Trump administration.
As a result, the Japanese Yen has dropped towards the end of the week, pushed even lower by a brief surge in demand for riskier investments on Thursday.
Investors are also concerned that the perceived inflation hitting Japanese consumer price data has merely been the result of global factors such as rising oil prices, rather than underlying Japanese price pressures.
GBP/JPY Forecast: How Long will Sterling Strength Last?
The Pound has seen yet another strong session in recent days. However, with the Japanese Yen continuing to be the foreign exchange market’s ‘safe haven’ currency of choice, this bullishness may not last much longer.
Depending on the next actions from US President Donald Trump, investors could quickly return to safe havens once again.
Sterling is likely to continue performing strongly in the coming days if Brexit plans offer clarity to markets, or if this weekend’s potential UK-US trade talks look optimistic.
Japanese data due for publication over the next few days may also influence movement in the Japanese Yen.
Friday’s Asian session will see the publication of Japan’s key December Consumer Price Index (CPI) results. As inflation concerns take hold this week, any signs that inflation is not falling as much as expected could bolster JPY demand slightly. Yearly inflation is predicted to fall from 0.5% to 0.2%.
Japanese Yen investors may also react to Japanese retail sales figures from December when markets open next week.