Pound to Japanese Yen (GBP/JPY) Exchange Rate Drops -0.8% on UK GDP Slump

Worse-than-Forecast UK GDP Growth Triggers Sharp GBP/JPY Exchange Rate Decline

The Pound (GBP) has fallen sharply against the Japanese Yen (JPY) today, following the release of concerning UK Q1 GDP estimates.

Initial readings for Q1 2018 show GDP growth falling to its lowest level in five years, with a quarterly decline from 0.4% to 0.1% and an annual dip from 1.4% to 1.2% being estimated.

The projections have battered Sterling, prompting widespread losses in Pound exchange rates against most regular peers.

Commons Backing of Customs Union Membership Fails to Boost Pound to Yen (GBP/JPY) Exchange Rate

The outcome of a House of Commons debate on whether the UK should remain in the EU customs union has failed to improve the Pound to Yen (GBP/JPY) exchange rate today.

The lengthy Commons event closed with a vote, in which a majority of MPs approved the UK remaining in a customs union after leaving the EU.

The lack of GBP/JPY appreciation on the news may be because the outcome of the vote was not binding, thereby reducing its impact.

Japanese Yen to Pound Exchange Rate Rises despite Dovish BoJ Outlook

The recent rise in the Japanese Yen to Pound (JPY/GBP) exchange rate is primarily down to GBP being the weaker currency in the pairing.

The latest economic events in Japan haven’t supported the Yen’s (JPY) advance, with the Bank of Japan (BoJ) giving a cautious economic outlook.

BoJ officials have left interest rates at -0.1% and removed their deadline for meeting the 2% inflation target.

This suggests steady but slow growth in the Japanese economy, and that the BoJ is reluctant to make any immediate changes to monetary policy.

Pound to Japanese Yen Exchange Rate Forecast: Are GBP/JPY Gains ahead on UK PMI Growth?

The Pound to Japanese Yen exchange rate (GBP/JPY) could recover in the coming week, when a series of UK PMI activity measures are released from 1 May to 3 May.

Forecasts have been positive across the board, with the readings expected to show higher manufacturing, construction and services sector activity in April.

The construction and services readings are the main measures to watch out for. In the former case, a rise from 47 points to 51.9 will lift the construction sector out of contraction.

The services sector, which is already in a state of growth, is expected to move further away from the sub-50 point contraction range with a rise from 51.7 points to 54.

If all three of the PMI readings show rising activity as expected, the Pound (GBP) could make steady gains against the Japanese Yen (JPY) next week.

Chance of Japanese Yen to Pound (JPY/GBP) Exchange Rate Losses on Falling Confidence Levels

For Japanese Yen (JPY) traders, next week’s economic data may not be entirely supportive based on current forecasts.

A finalised manufacturing PMI reading on 1 May is predicted to be upgraded, while services sector activity is also tipped to be reported higher on 2 May.

The week’s most high-impact data, however, will be a consumer confidence measure for April which could damage the Yen if it shows the expected decline.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon