Pound to Japanese Yen (GBP/JPY) Exchange Rate Rises 0.7% as Bank of Japan Stays Dovish

Cautious Outlook from Japanese Central Bank Triggers GBP/JPY Exchange Rate Rise

The Pound (GBP) has risen by 0.7% against the Japanese Yen (JPY) today, mainly because recent Bank of Japan (BoJ) comments have drained JPY trader confidence.

Today’s Sterling rise has put the GBP/JPY exchange rate up at a level of ¥146.73 on the interbank rate, which is the best level of trade in over a week.

The dovish tone of BoJ officials has notably devalued the Japanese Yen, triggering clear losses against the Pound and other currency peers.

Indicating that there is unlikely to be any significant action anytime soon, BoJ policymakers left interest rates at -0.1% and downgraded their forecast for hitting 2% inflation.

The Japanese central bank has historically struggled to get inflation near its target range and the latest statements imply that there will be no immediate breakthroughs.

As well as the cautious remarks damaging the Yen today, the Japanese currency has also been weakened due to the fact that a more positive BoJ outlook had been expected.

Examining the contrast between expectations and reality, Keiko Onogi of Daiwa Securities Co said:

‘I think it should be more important for the BoJ to have clear communication with the markets going forward, but as you see by now, the bank is extremely poor in communication.’

UK Economic News: GBP/JPY Exchange Rate Gains Limited on Falling Consumer Confidence

While the Bank of Japan’s cautious tone has pushed the Pound to Yen (GBP/JPY) exchange rate higher today, UK economic data has limited pairing gains.

GfK’s consumer confidence reading for July has proven unsupportive, showing a decline from -9 points to -10.

Consumer confidence has been negative since 2016 and this result means that a return to more widespread optimism seems a long way off.

Pound Sterling to Japanese Yen Exchange Rate Forecast: Will UK PMI Slowdown Worsen GBP/JPY?

Looking ahead to tomorrow, the Pound (GBP) might slip against the Japanese Yen (JPY) when the UK manufacturing PMI comes out in the morning.

July’s reading is tipped to show a slowdown in UK manufacturing sector activity, which may be the first of three poor PMI releases this week.

Despite this potential for GBP/JPY losses, the Japanese Yen could be devalued further by tomorrow’s finalised Japanese manufacturing PMI for July.

This is expected to show a shift in the manufacturing activity reading from 53 points to 51.6, which is relatively close to the sub-50 point contraction range.

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