Pound Japanese Yen (GBP/JPY) Exchange Rate Stable Following UK Services PMI
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is trading on a solid footing this morning as markets react to the UK’s latest Services PMI.
At the time of writing, the GBP/JPY exchange rate is virtually unchanged from its opening levels, leaving the pairing trading at around ¥137.7120.
Pound (GBP) Exchange Rates Hold Ground as UK Service Sector Expands
The Pound (GBP) is holding steady against the Japanese Yen (JPY) and the majority of its other peers this morning after GBP investors were relieved to see that the UK’s service sector avoided the slump seen in the manufacturing and construction sectors, and continue to expand last month.
According to data published by IHS Markit, the UK’s service PMI climbed from 50.4 to 51.0 in May, beating expectations of a more modest rise to 50.6.
However, while the service sector may have continued to expand, ultimately growth remains largely muted, and when viewed alongside the other PMI figure hints towards the UK economy almost stagnating in the second quarter.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘Although service sector business activity gained a little momentum in May, with growth reaching a three-month high, the pace of expansion remained disappointingly muted and failed to offset a marked deterioration in manufacturing performance and a fall in output of the construction industry during the month.’
Japanese Yen (JPY) Exchange Rates Steady as Risk-Off Tone Prevails
At the same time, the Japanese Yen (JPY) is holding its ground this morning as global trade concerns bolster the appeal of the safe-haven currency.
Investors have grown increasingly skittish over the last week after Donald Trump shocked markets by announcing that the US would place tariffs on all exports from Mexico unless the Mexican government does more to curb illegal emigration to the US.
Any hopes that a last minute deal may prevent the tariffs coming into effect were dashed on Tuesday as Trump said they were ‘more likely than not’ coming into effect next week.
This comes as trade tensions between the US and China continue to flare – something which has seen investors flock to the Yen in recent weeks.
GBP/JPY Exchange Rate Forecast: Carney to Remain Hawkish on Interest Rates?
Looking ahead, movement in the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate throughout the second half of the week is likely to be driven by a speech by Bank of England (BoE) Governor Mark Carney on Thursday.
Following the BoE’s May policy meeting Carney struck a hawkish tone, telling markets that they were ‘underestimating’ the pace the bank would raise interest rates.
However, since then, we have seen the resignation of Theresa May as well as growing signs that global growth is slowing, so GBP investors will be eager to see if he strikes a more cautious tone tomorrow.
Bank of Japan Governor Haruhiko Kuroda will also speak in the second half of the week.
While Kuroda is unlikely to offer up any policy bombshells, JPY investors will likely be on the watch for any comments about the impact of the US-China trade dispute on the domestic economy, with the Yen (JPY) potentially softening if he warns trade fears are dragging on growth.
In light of the BoE speech tomorrow and ongoing Brexit uncertainty, the short-term outlook for the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is neutral/negative.