Pound to Japanese Yen (GBP/JPY) Exchange Rate News: Sterling Weakens as Investors Flock to Safe Haven Yen on Trade Fears

Pound to Japanese Yen Exchange Rate (GBP/JPY) Fails to Hold its Ground due to Safe Haven Demand

Trade war jitters seem to be the primary cause of this week’s major currency movements thus far, as the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has seen weak trade with the safe haven Japanese Yen (JPY) remaining appealing.

GBP/JPY slumped last week from the interbank level of 146.94 to 145.76. Since then GBP/JPY has continued to weaken this week and at the time of writing was trending near the interbank level of 145.20.

Sterling has been unable to hold its ground this week so far despite the Bank of England’s (BoE) cautious tone last week, and as the bank’s newest policymaker has surprised investors by revealing himself to hold a more dovish stance than his predecessor.

As Pound (GBP) investors anticipate major UK growth stats due later in the week, the Japanese Yen has easily benefitted from safe haven demand to push GBP/JPY lower.

Pound (GBP) Exchange Rates Struggle to Hold on BoE Policymaker’s Caution

Investors have had little reason to keep buying the Pound (GBP) this week so far, as markets anticipate the latest UK growth data and Bank of England (BoE) hawkishness is weighed by dovish comments.

The Bank of England’s newest policymaker, Jonathan Haskel, concerned Pound investors by stating that Britain’s economy may not be quite as strong as some think.

As he is succeeding Ian McCafferty, one of the bank’s most hawkish members, Haskel’s dovish tone weighed on Sterling and caused speculation that fewer policymakers would be willing to hike UK interest rates soon.

Brexit concerns continued to worsen again, as global trade jitters highlighting concerns about how Britain’s economy may fare outside the EU single market. According to Kit Juckes from Societe Generale:

‘If the spreading weakness of global equity markets reflects a dawning realisation that the economic cost of a trade dispute is significant, then it should be no surprise that concern is growing about the impact of leaving the single market,’

Japanese Yen (JPY) Exchange Rates Sturdy on Market Demand for Safe Havens

The Japanese Yen (JPY) was likely to see strong trade this week regardless of domestic Japanese news, as investors sought out safe haven assets.

US President Donald Trump has persisted with plans to place trade tariffs on other major trading partners.

As economists become increasingly anxious that a trade war could emerge between the US and China and involve other nations, investors have been buying safe haven currencies like the Japanese Yen to avoid losses.

Yen support has been further bolstered by recent Japanese data. Last week saw Japan’s May inflation rate beat expectations and come in at 0.7% month-on-month, while Monday’s Japanese data was also solid.

Japan’s final April coincident index printed at 117.5 rather than the expected 115.7, and the leading economic index climbed to 106.2 rather than 105.6.

Pound to Japanese Yen (GBP/JPY) Forecast: Trade Developments and Key Data in Focus

The Pound to Japanese Yen (GBP/JPY) exchange rate may remain weak in the coming sessions, unless there are any significant changes in global trade affairs to the upside.

So long as trade tensions between the US and rivals persist, investors will find safe haven currencies like the Japanese Yen (JPY) appealing. This is likely to keep pressure on GBP/JPY.

On top of this, the Pound is unlikely to find much support until later in the week, when Britain’s final Q1 Gross Domestic Product (GDP) report is published on Friday.

Of course, Sterling (GBP) may strengthen if any fresh Bank of England (BoE) comments are perceived as being supportive of higher interest rates.

Some key Japanese stats will be published later in the week which could influence Japanese Yen trade. Japanese retail sales from May will come in on Thursday, with consumer confidence and unemployment data on Friday.

Overall, however, the market outlook regarding global trade concerns is likely to have the biggest influence on the direction of Pound to Japanese Yen (GBP/JPY) exchange rate.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard