Pound Sterling to Japanese Yen (GBP/JPY) Exchange Rate Close to 2-Month High

Pound to Japanese Yen Exchange Rate Avoids Losses Despite Brexit Jitters

This week’s Brexit developments have not been impactful enough to help improve the Pound (GBP) outlook, but the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has still trended near its best levels this week as investors sell the Japanese Yen (JPY).

Since opening this week at the interbank level of 142.42, GBP/JPY has been advancing and has been trending around two Yen higher. GBP/JPY hit its best level since early December yesterday, and trended closely below those highs this morning.

The Japanese Yen is a safe haven currency, and since this week’s news has made investors hungrier for risks the Japanese Yen has seen weaker demand.

Negotiations between the US and China are perceived as going well, with more investors now believing that the previous deadline for talks will be extended. This has made investors more willing to take risks.

On top of that, this week’s Japanese news and data has not been particularly supportive for the Yen.

Pound (GBP) Exchange Rates Avoids Losses despite Fears of Fractures in UK Politics

Much of the Pound to Japanese Yen (GBP/JPY) exchange rate’s gains this week have been due to Japanese Yen (JPY) weakness, as well as a brief rise in hopes that there could soon be a breakthrough in Brexit talks.

However, ultimately this week’s Brexit news has not influenced the Pound outlook much as there has been no major progress. UK political uncertainties instead continue to rise as investors with under 40 days until the Brexit is set to formally take place.

Yesterday, three members of UK Prime Minister Theresa May’s Conservative Party quit the party. The trio defected to the new independent group formed by resigned Labour Party members earlier in the week.

Concerns persisted that Conservative Party resignations could continue amid concerns about the direction of Brexit. As a result, the Pound’s potential for further gains was limited.

Japanese Yen (JPY) Exchange Rates Unappealing amid Japanese News and Risk-On

Investors had little reason to buy the Japanese Yen (JPY) today. Sessions of underwhelming Japanese data, a more cautious Bank of Japan (BoJ), and market demand for riskier currencies combined to keep pressure on the Japanese Yen.

Japan’s trade balance unexpectedly deepened more than expected in January, as exports unexpectedly contracted at -8.4%.

Japanese construction orders from December, and Nikkei’s February manufacturing PMI, were both disappointing too.

Nikkei’s Japanese manufacturing index was expected to edge higher from 50.3 to 50.4, but instead fell below the 50 point mark and scored a contraction of 48.5.

Earlier in the week, Bank of Japan Governor Haruhiko Kuroda warned that further easing in monetary policy was possible amid a slowdown in global growth.

Pound to Japanese Yen (GBP/JPY) Exchange Rate Investors Anticipate Japanese Inflation Report

The Pound to Japanese Yen (GBP/JPY) exchange rate could be in for a week of gains, unless there is a fresh session of Pound (GBP) selling or the Japanese Yen (JPY) finds some stronger support.

Investors will be focused on Friday’s upcoming Japanese Consumer Price Index (CPI) inflation rate results.

Japan’s inflation rate is expected to have slowed from 0.3% to 0.2% year-on-year, so if inflation slows more than expected it could make it easier for GBP/JPY to end the week higher.

On the other hand, Japan’s core inflation rate is expected to have risen to 0.8% year-on-year, so if it meets or surpasses expectations if could soften Bank of Japan (BoJ) easing jitters and bolster Yen demand.

Of course, further developments in US-China trade negotiations would also make investors less likely to want to buy safe haven currencies like the Yen.

Brexit developments will remain in focus, too. The Pound to Japanese Yen (GBP/JPY) exchange rate outlook would see a surge if the perceived chances of a soft Brexit rise.

Josh Jeffery

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