Pound to Japanese Yen (GBP/JPY) Exchange Rate Tumbles on Doused Brexit Hopes
For much of the past week, investors have piled into the Pound (GBP) as hopes rose for a softer Brexit outcome. Since yesterday, however, the Pound to Japanese Yen (GBP/JPY) exchange rate has slumped, shedding those gains on fresh Brexit uncertainties and a rise in safe haven demand.
After opening last week at ¥144.15, GBP/JPY surged throughout the week and closed at the level of ¥146.36. GBP/JPY also briefly touched a half-month high of ¥146.55.
However, since markets opened this week GBP/JPY has already shed all of those gains. At the time of writing, the weak Pound is being pushed lower by a resurgent Japanese Yen (JPY), and the pair is trending near a two month low of ¥143.70.
Demand for the Japanese Yen has been rising, despite this week’s Japanese data being mixed so far. Investors are more eager to buy the safe haven Japanese currency due to market uncertainties over global trade tensions.
Pound (GBP) Exchange Rates Slide on Fresh UK Political Uncertainty
Investors were piling into the Pound (GBP) for much of last week, as UK officials showed more optimism that the government would be able to reach a Brexit solution with the opposition Labour Party in cross-party negotiations.
This continued to support the Pound at the beginning of this week, but fresh doubts began to emerge yesterday and these have continued to build.
While some officials are still showing optimism that a deal can be reached within the next few weeks, analysts are concerned about further uncertainty that may come on the back of upcoming European elections.
Officials have acknowledged that the UK’s involvement in European elections will go ahead and that a deal will not be reached beforehand, which has caused the Pound to shed much of the gains it saw last week.
Japanese Yen (JPY) Exchange Rates Firm despite Mixed Japanese Data
The Japanese Yen (JPY) has been able to more easily capitalise on the Pound’s (GBP) weakness this week, as Yen demand is bolstered by both global and domestic factors.
While strength in its rival, the US Dollar (USD), limited Yen appeal last week, the Yen has been one of this week’s stronger performers so far.
As US-China trade negotiations appear to hit fresh obstacles, and concerns rise that the nations could pull back on compromises, markets have become more risk-averse and safe haven currencies like the Japanese Yen have seen stronger demand.
The Japanese Yen also benefitted from signs that the Bank of Japan (BoJ) was hesitant to further ease monetary policy, despite recent speculation.
As a result of these Yen-positive factors, the Japanese Yen has climbed despite mixed Japanese data.
Yesterday’s Japanese manufacturing PMI from Nikkei unexpectedly avoided contraction which supported the Yen, but this morning’s Japanese services PMI showed the services sector slowing.
Pound to Japanese Yen (GBP/JPY) Exchange Rate Could See Further Losses on Safe Haven Demand
Pound (GBP) investors generally do not expect any major Brexit developments in the near future, and this is keeping the Pound’s volatility low.
With investors generally hesitant to make big movements on the Pound amid a lack of fresh solid changes to the Brexit outlook, the Japanese Yen’s (JPY) appeal as a safe haven may drive more movement in comparison.
The Japanese Yen could be in for further gains in the coming sessions if global trade jitters worsen, so investors will be carefully watching US-China trade negotiations.
Still, some late-week data could drive GBP/JPY as well.
Japanese consumer confidence from April will be published tomorrow, with household spending following on Friday. UK trade balance, growth and business investment stats will be published on Friday as well.
Despite this, it is potential Brexit developments that are more likely to drive the Pound to Japanese Yen (GBP/JPY) exchange rate over the next few days.