Pound to Japanese Yen Exchange Rate Nears 2019 Best despite Weaker Sterling
While demand for the Japanese Yen (JPY) was fairly sturdy in the middle of the week, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate ultimately saw strong gains throughout the week on the latest Brexit developments.
Since opening this week at the interbank level of 144.66, GBP/JPY has seen gains of over three Yen.
The pair has been unable to hold Thursday’s highs, which saw it briefly touch its best interbank levels since November 2018. This is because fresh uncertainties over what’s next for Brexit left the Pound (GBP) unappealing towards the end of the week.
The Pound was able to continue to trend near its best levels versus the Yen though, as a cautious tone from the Bank of Japan’s (BoJ) latest policy decision left the Japanese Yen unappealing.
Pound (GBP) Exchange Rates Steady as Investors Await Next Major Brexit Steps
Brexit news has been significantly influential over the past week, as Parliament held major votes over how the process should unfold going forward and they have generally pointed away from a worst-case scenario no-deal Brexit.
Perhaps the biggest news of the week was that MPs voted in favour of an amendment to reject Britain ever seeking a no-deal Brexit at any point.
However, while bets of a no-deal Brexit have receded, investors are still uncertain about how the process will ultimately end due to the week’s other votes.
MPs once again rejected the government’s Brexit plan earlier in the week, and last night voted to delay the formal leaving date.
Next week will see the government try for a third time to push its Brexit plan through Parliament, as well as negotiate a delay with the EU.
Uncertainty over how long Brexit could be delayed for or if the EU would even agree to a delay limited Pound (GBP) demand at the end of the week.
Japanese Yen (JPY) Exchange Rate Strength Limited amid Bank of Japan (BoJ) Caution
Demand for the Pound (GBP) was a little weaker towards the end of the week, but the Japanese Yen (JPY) was unable to capitalise on the Pound’s pause in strength as investors reacted to the latest Bank of Japan (BoJ) policy decision.
The Bank of Japan left monetary policy frozen as was widely expected, and indicated that the status quo on its monetary policy outlook would not change.
However, Bank of Japan Governor Haruhiko Kuroda noted that due to slowing global growth, the bank’s expectations for Japanese exports and factory output to boost growth had been tempered slightly.
The bank also continued to reject calls from politicians and banks to hike Japanese interest rates or change its inflation targets. According to Kuroda:
‘I don’t see the need to change the target, or believe that doing so would be desirable,’
Pound to Japanese Yen (GBP/JPY) Exchange Rate Investors Anticipate another Week of Brexit News
Investors steadied on the Pound (GBP) today, but largely in anticipation of knowing that more intense volatility was likely to be just around the corner.
While a no-deal Brexit is now perceived as unlikely, a delay to the Brexit process means prolonged uncertainty – unless of course the government’s Brexit plan actually succeeds in its third ‘meaningful vote’.
The government will hold another vote on Tuesday, and if it is able to succeed it will confirm the government’s soft Brexit plans.
If not though, investors will look to see how Brexit delay negotiations between the UK and EU turn out.
A long delay would mean less short-term uncertainty for markets but more long-term uncertainty, so it may give Sterling a limited boost in demand.
The Japanese Yen (JPY), on the other hand, will find support if investors look to avoid risks and buy safe haven currencies, especially if its rival the US Dollar (USD) is unappealing.
In terms of data, the Pound to Japanese Yen (GBP/JPY) exchange rate could be influenced by upcoming Japanese trade data and industrial production data due on Monday.