Pound to Japanese Yen Exchange Rate Mixed despite Lack of Yen Support
Due to recovering demand for the Japanese Yen’s (JPY) rivals, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate actually advanced last week despite Brexit jitters dominating the Pound (GBP) outlook. However, the pair has struggled to keep rising.
After opening last week at the interbank level of 136.63, GBP/JPY briefly slipped lower before climbing towards the end of the week. GBP/JPY closed the week near the interbank level of 137.00.
Sterling briefly saw a surge in demand this morning as investors digested the weekend’s G20 developments, causing GBP/JPY to touch a fresh half month interbank high of 137.77 before the pair slipped again.
At the time of writing on Monday, GBP/JPY was trending fairly closely to the week’s opening levels again.
Investors have been hesitant to keep piling into the Pound as Brexit fears keep a lid on its appeal, even despite a lack of demand for the Yen.
Pound (GBP) Exchange Rates Fail to Sustain Recovery amid Concerning UK Factory Data
The Pound’s (GBP) movement was largely limited throughout June, as persisting no-deal Brexit fears kept pressure on the British currency.
Conservative Party leadership contest frontrunner Boris Johnson and his opponent Jeremy Hunt have both attempted to play down the chances of a no-deal Brexit today, but they both maintain that a no-deal Brexit is more likely than a delay to the process.
With no-deal Brexit fears showing no signs of abating, the Pound’s potential for gains has been limited, and UK data has been too underwhelming to offer the British currency any support either.
This morning’s data only put further pressure on the Pound outlook, as Markit’s June manufacturing PMI unexpectedly contracted at 48 rather than at the expected 49.2.
According to Justin Benson, UK Head of Automotive at KPMG, said that uncertainty was likely to worsen further and that factors would need to prepare further:
‘Right now UK manufacturers need certainty, however, at the moment there’s a high probability of a no-deal Brexit. The UK’s makers need to start preparing for this eventuality, if they haven’t done so already.’
Japanese Yen (JPY) Exchange Rates Sold on US-China Trade Breakthrough
The Japanese Yen’s (JPY) biggest appeal is as a safe haven currency, and in recent months it has been moving in reaction to global trade developments.
The Yen’s losses last week for example, were due to rising market hopes that the US and China would make positive progress in trade relations during the weekend’s G20 Summit in Osaka.
Investors sold the safe Yen in favour of its rival the US Dollar (USD), as well some currencies correlated strongly to trade sentiment like the Canadian Dollar (CAD).
Over the weekend, the US and China did indeed reach a breakthrough in trade relations. The nations announced that they would put further escalations of trade tariffs on pause for now, and that negotiations would resume.
This left the Yen limp when markets opened on Monday, and Japan’s latest data did little to support the Yen either.
Japan’s Q2 Tankan indexes fell short of forecasts in many notable manufacturing prints, as did Nikkei’s manufacturing PMI and the June consumer confidence report.
Pound to Japanese Yen (GBP/JPY) Exchange Rate Could See Further Gains on Trade Developments
Much of the week’s most influential Japanese data has been published already, and had little influence on the Japanese Yen’s (JPY) movement.
The Japanese Yen remains more heavily influenced by market trade sentiment and safe haven demand, and the Pound (GBP) is unlikely to be influenced too much by data this week either.
Investors may react to Wednesday’s Japanese and UK services PMI data, or Friday’s Japanese household spending data, but the biggest focus is likely to remain on political developments.
For the Pound, investors will focus on potential developments in Brexit or the Conservative Party leadership contest. As for the Yen, further news regarding US-China trade relations and other geopolitics are more likely to drive shifts in safe haven demand.
If there are signs that trade relations between the US and China could continue to improve, investors will find safe haven currencies less appealing, and the Pound to Japanese Yen (GBP/JPY) exchange rate could rise further.