The Pound to Japanese Yen (GBP JPY) exchange rate pushed higher on Wednesday following a better than expected Construction PMI from the UK.
GBP JPY currently sits at around 145.21 following the release of the construction data, up from around 144.57 from its worst levels overnight on Tuesday.
Pound (GBP) Rallies as Construction Activity Jumps
The Pound advanced against the Japanese Yen this morning following some upbeat data from the UK.
According to the consultancy firm IHS Markit the UK’s Construction PMI advanced from 52.2 to 53.1 in April, beating initial expectations that it would slide to 52.0, with activity growing at its fastest pace since the start of 2017.
Demand from civil engineering projects such as Crossrail signalled a sharp increase in activity, with an upturn in the turnover of residential properties also contributing to a rise in employment and purchase orders.
However firms remain nervous in the face of Brexit talks as they grow concerned that souring negotiations could lead to great restrictions on workers from the continent (a major source of skilled labour for the sector) while increased costs also places pressure on Britain’s builders.
Paul Trigg, construction specialist and assistant head of risk underwriting at trade credit insurer Euler Hermes said;
‘Despite recent robust performance across construction, we expect the sector to see anaemic growth in the short to mid-term as concerns about falling inward investment levels, thinning long-term order books and access to skills grow.’
Lull in Markets weakens Japanese Yen (JPY)
The Japanese Yen struggled to advance today as the domestic market closed in observance of Constitution Day, leaving little economic data to help drive the Yen higher.
Investors took this opportunity to flock to the US Dollar (USD) in advance of this evening’s Federal Reserve Meeting.
While the Fed is not expected to raise interest rates this month, analysts expect that Fed Chair Janet Yellen could hint towards tightening monetary policy next month, with CME’s FedWatch tool placing Market odds of a June rate hike at around 70%.
GBP/JPY Exchange Rate Forecast: UK Services PMI Ahead
The GBP JPY exchange rate may retreat on Thursday as the UK’s latest Services PMI is expected to slide from 55.0 to 54.5 in April.
However, the strong performance in the UK’s Manufacturing and Construction PMI’s last month could signal a better than expected report from Britain’s private sector, likely sending the Pound higher as it accounts for a major portion of the UK’s economic growth.
Meanwhile, the Japanese Yen may advance tomorrow as analysts predict that foreign investment in Japan’s bond market will have risen for the week ending 29
th
of April.
Looking further ahead the Pound may weaken over the coming weeks as European officials begin to gear up for the start of Brexit negotiations, with recent suggestions that the EU will seek to finalise a £85bn ‘divorce bill’ from the UK before any discussion of a new trade agreement can begin likely to weigh on Sterling.