The Pound crashed dramatically against the Japanese Yen on February 2
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and seems set to only worsen its performance in the future given the increasing pressure that Brexit is having on the Pound’s value.
The Yen’s advance against the Pound has come along with a slight rise in consumer confidence, although US concerns have also been a significant contributing factor.
From January 30
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to February 2
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, the Pound plummeted against the Japanese Yen, falling from a starting high of 144.55 to 140.95 by the close of Thursday’s trading session.
Data-Packed Day for UK Economy
The Pound slumped by -1.6% against the Japanese Yen on February 2
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, following a burst of economic and political developments that severely reduced confidence in Sterling.
The first came late on February 1
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, when MPs in the House of Commons overwhelmingly approved the initial bill for Article 50. As a precursor to the Government triggering Article 50 to take the UK out of the EU, the bill has now been moved onto the amendment phase. This has only brought fresh concerns, however, as now the UK has all but irreversibly been set on the path to Brexit.
The Bank of England (BoE) issued a fairly optimistic forecast for the UK economy, predicting rising inflation and growth, but investors remained concerned by a lack of clarity on the next interest rate decision and how the UK could fare in the long-term.
Rounding off a bad run of UK data was the January construction PMI, which fell by more than expected on the month.
Japanese Yen Demand Accelerated by Rising Confidence, Manufacturing Figure
The Yen has had a less busy week than the Pound, but has still managed to rise after Wednesday’s manufacturing PMI and Thursday’s consumer confidence score for January.
Manufacturing rose from 52.4 to 52.7 on Wednesday, while the slight uptick from 43.1 to 43.2 still counted as a positive for consumer confidence on Thursday.
Elsewhere, interest in the Yen was reinforced by US Dollar crash, which came after Donald Trump was reported to have quarrelled with the Australian Prime Minister over the transfer of refugees.
GBP/JPY Exchange Rate Forecast
For the remainder of this week and the next, Pound/Japanese Yen exchange rate movement may occur as a result of the UK services PMI on February 3
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as well as the December trade balance and production figures for December on February 10
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.
From Japan, major upcoming developments will include February 3
rd
’s services PMI, as well as next week’s machinery and machine tool orders spread over Wednesday and Thursday.
On the UK news, services are due to fall and could further weaken Sterling before the weekend, while next week’s trade balance previously showed a deficit of -4.17bn.
Outside of this news, the Pound could be shifted by the ‘committee stage’ of the Article 50 bill over February 6
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and 7
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, when MPs will be able to propose and potentially implement amendments.