Will GBP/JPY Remain Pressured by Safe Haven Demand? Pound Japanese Yen Exchange Rate Outlook

Pound to Japanese Yen (GBP/JPY) Exchange Rate Recovers Weekly Losses on Brexit Speculation

Despite market demand for safe haven currencies like the Japanese Yen (JPY) amid worsening US-China trade tensions, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has recovered this week’s losses, and may even end the week slightly higher.

GBP/JPY opened the week at the interbank level of ¥143.84 but has since slipped lower due to global demand for safe havens. On Wednesday, GBP/JPY briefly touched a high of ¥144.91, but has since been trending near the level of ¥143.95.

As the Japanese Yen’s performance has been steady this week, most of the week’s Pound to Japanese Yen exchange rate movement has been caused by developments regarding Brexit.

The biggest Brexit happening this week so far was a Wednesday report claiming that German and UK governments had offered to drop major points of contention from UK-EU Brexit negotiations.

This bolstered market hopes that major nations involved with negotiations would rather make concessions than allow negotiations to fail. The report, however, has since been denied, causing GBP to relinquish most of its gains.

Pound (GBP) Exchange Rates Find Support in Brexit Speculation

While not exactly a strong enough surge to help the Brexit-battered Pound (GBP) truly recover, the British currency has seemingly avoided a fall against the Japanese Yen (JPY) thanks to the latest Brexit developments.

On Wednesday, a report emerged suggesting that the German and UK governments were prepared to make concessions on demands in Brexit negotiations, in order to ensure a deal is reached.

The news helped the Pound recover from the week’s losses against a steady Japanese Yen. Analysts are speculating that as the Pound is so weak, it is becoming more sensitive to upside risks on good news.

According to Viraj Patel, FX strategist from ING Bank:

‘$GBP showing how it is much more sensitive to good news vs. bad news, May not last (like post Barnier) but dips make $GBP attractive,

The more positive Brexit headlines we get, the harder it’ll be for $GBP bears to ignore.’

Due to uncertainties about whether this report would actually influence UK-EU negotiations though, the Pound’s gains were limited and GBP/JPY was unable to advance too far above the week’s opening levels.

Japanese Yen (JPY) Exchange Rates Avoid Major Losses amid Safe Haven Demand

Investors have found safe haven currencies like the Japanese Yen (JPY) consistently appealing this week, as global concerns about trade and US protectionism hit headlines once again.

Concerns of potential escalations in a US-China trade war have left safe haven currencies like the Japanese Yen looking persistently appealing.

This, as well as those ongoing Brexit uncertainties, has made it difficult for the Pound to Japanese Yen (GBP/JPY) exchange rate to keep climbing.

The Yen remains fairly resilient, despite this week’s Japanese PMI figures coming in with mixed results.

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

Friday’s Japanese coincident index and leading economic index projections for July are unlikely to be particularly influential, so the Pound to Japanese Yen (GBP/JPY) exchange rate is likely to react to geopolitical news for the rest of this week.

Pound (GBP) investors anticipate further Brexit developments, especially comments from the EU regarding this week’s report on alleged concessions from German and UK officials.

With the Pound likely to be driven by Brexit news, the Japanese Yen (JPY) is likely to remain inspired by market risk-sentiment.

The Japanese Yen’s appeal as a safe haven currency could lighten if US-China trade jitters don’t worsen as much as feared, or if the US shows a more amicable stance on trade with allies like Canada.

Investors will also be anticipating key UK and Japanese data due for publication next week, including Gross Domestic Product (GDP) stats due to be published on Monday.

Japan’s final Q2 GDP growth rates will be published during the Asian session, with Britain’s July growth rate due to come in during the European session.

Next Tuesday will see Britain’s July unemployment rate published, and the Bank of England’s (BoE) September policy decision on Thursday could also cause some notable Pound to Japanese Yen (GBP/JPY) exchange rate movement.

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