Pound to Japanese Yen Exchange Rate Benefits from Risk-Sentiment but UK Data Weighs
Due to market aversion to safe haven currencies this week, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has spent most of the week climbing. Its gains have been limited today though, as Britain’s latest inflation stats fell short of expectations.
Since opening the week at the level of ¥141.98, GBP/JPY has climbed over half a Yen – although the pair has been unable to hold the best levels seen this morning.
The primary cause of GBP/JPY gains has been market risk-sentiment, with investors hesitant to buy safe haven currencies like the Japanese Yen (JPY).
Anticipation for tomorrow’s upcoming Japanese growth rate report is also dampening demand for the Japanese Yen, as investors steady their positions on the currency.
Pound (GBP) Exchange Rates Fail to Hold onto Highs as UK Inflation Falls Short
While the Pound (GBP) has been climbing versus the Japanese Yen (JPY) this week, its gains have been limited by various factors including Brexit uncertainties and UK data.
The UK government hopes to renegotiate its Brexit plan to make it popular enough to pass through Parliament, but time is running out and the formal Brexit date is still set for 29 March.
This is weighing on the Pound’s potential for gains, but GBP/JPY was sold from weekly highs on Wednesday following the publication of Britain’s latest Consumer Price Index (CPI) inflation rate results.
UK inflation was forecast to have worsened from 0.2% to -0.7% month-on-month and from 2.1% to 1.9% year-on-year, but the figures came in at -0.8% and 1.8% respectively.
The data dampened Bank of England (BoE) interest rate hike bets and knocked GBP/JPY back from its weekly highs.
Japanese Yen (JPY) Exchange Rates Sold as Investors Look Towards Riskier Investments
Safe haven currencies like the Japanese Yen (JPY) are losing their shine, as US-China trade developments make investors more optimistic about the global outlook.
This week has seen US-China trade negotiations resume, and US President Donald Trump has indicated that an expected deadline for talks could be delayed if there are promising developments.
Amid hopes that the US and China could finally find some kind of resolution to their trade dispute, investors are more willing to take risks. This has left safe haven currencies like the Japanese Yen less appealing.
This week’s Japanese data has not been particularly supportive so far. Japan’s tertiary industry index and machine tool stats on Tuesday were disappointing, as were Japanese PPI figures this morning.
As a result, investors have no reason to buy the Japanese Yen ahead of tomorrow’s key Japanese growth rate stats
Pound to Japanese Yen (GBP/JPY) Exchange Rate Investors Await Japanese Growth Report
The Pound to Japanese Yen (GBP/JPY) exchange rate may be in for further gains later this week, if upcoming Japanese data disappoints or markets perceive US-China trade developments as optimistic.
Thursday’s Asian session will see the publication of Japan’s Q4 Gross Domestic Product (GDP) projections. The growth rate is expected to have rebounded slightly from -0.6% to 0.4% quarter-on-quarter.
If the data beats expectations, it could give the Japanese Yen (JPY) its biggest boost in support this week and knock GBP/JPY lower. However, poor Japanese data would instead make it easier for GBP/JPY to climb higher.
Of course, political developments will also remain influential.
The Pound (GBP) will strengthen if there are any optimistic Brexit developments, while the safe haven Japanese Yen will become more appealing if US-China trade negotiations are seen as going badly.
UK retail sales stats due out towards the end of the week could also influence the Pound to Japanese Yen (GBP/JPY) exchange rate.