GBP/JPY Fluctuates on UK Retail Sales and Japanese Export Data

The Pound to Japanese Yen exchange rate surged last week due to Bank of England (BoE) and Japanese political news, but the pair has seen largely flat trade since Monday due to data.

GBP/JPY surged from 142.31 to 150.57 last week. On Tuesday, the pair briefly touched 151.50 – its best level since the 2016 Brexit vote.

Pound (GBP) Bolstered by UK Retail Stats

Despite uncertainty about how hawkish the Bank of England (BoE) could become over the next few months, the Pound has remained relatively appealing this week.

Better-than-expected ecostats, as well as increasing confidence that the BoE is likely to tighten UK interest rates at least once in the foreseeable future, have supported Pound trade.

Wednesday’s August UK retail sales results beat expectations in every major print.

August retail sales were forecast to slow from 1.3% to 1.1% year-on-year, but instead jumped from a revised 1.4% to 2.4%.

The month-on-month print beat 0.2% expectations and advanced from a revised 0.6% to 1%.

Some analysts pointed out that this data indicated UK consumers were still happy to spend, despite the pay squeeze, which has boosted the chances of BoE action in the coming months.

Japanese Yen (JPY) Supported by Strong Japanese Export Data

An unexpectedly strong Japanese trade report from August has led to slightly stronger Japanese Yen (JPY) demand, as it has indicated that global demand for Japanese goods was stronger than expected.

Japanese export growth was forecast to edge higher from 13.4% to 14.7% in August, but instead jumped to 18.1%. This was the ninth consecutive month of rising Japanese exports and was also the highest figure for the print since 2013.

Imports, on the other hand, didn’t slow to 11.8% as expected, but did slip from 16.3% to 15.2.%.

Overall, the Japanese trade surplus slipped from ¥422b to ¥113.6b, which was higher than the expected ¥94b.

However, the Yen’s strength has been weighed by anticipation for September’s Federal Reserve policy decision, as well as Japanese political uncertainty.

Reports suggest that Japanese Prime Minister Shinzo Abe may delay tax targets due to planning an October snap election have also left Yen investors jittery.

GBP/JPY Forecast: Brexit Speech in Focus

With it looking increasingly likely that Japan could hold a snap election in October, Japanese Yen movement could be limited.

If Thursday’s Bank of Japan (BoJ) policy decision surprises traders, this could inspire some Japanese Yen movement. No shifts in tone or policy are expected however, so JPY could continue to see relatively narrow trade.

GBP/JPY investors will be mostly looking ahead to Friday’s session, when UK Prime Minister Theresa May will hold a key Brexit speech.

In what could be the first major Brexit development in some time, the speech has potential to cause major movement in Sterling.

If the speech indicates that a ‘hard Brexit’ is looking more likely, GBP/JPY is likely to fall as Pound investors will find the ‘safe haven’ Japanese Yen more appealing.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail