Pound to Japanese Yen Exchange Rate Losses Limited as Safe Haven Demand Cools
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been trending lower this week, as the Japanese Yen (JPY) has benefitted from geopolitical uncertainties. The pair’s losses today have been limited though, and have been largely due to Brexit uncertainties weighing on Sterling (GBP).
After seeing modest losses last week and falling from the interbank level of 134.96 to 134.14, GBP/JPY has continued to trend with a downside bias this week so far.
At the time of writing on Wednesday morning, GBP/JPY trended relatively closely to a weekly interbank low of 133.36.
Investors sold the Pound today following yesterday’s stronger performance, while the Japanese Yen (JPY) saw mixed movement amid the latest shifts in US politics and global risk-sentiment.
Pound (GBP) Exchange Rates Fall Back as No-Deal Brexit Fears Persist
Yesterday saw the latest surprise turn in the ever tumultuous Brexit saga, as Britain’s highest court ruled that it was unlawful for Prime Minister Boris Johnson to prorogue parliament for as long as he had done.
The Supreme Court said that Johnson’s prorogation was void, and that parliament had not been prorogued. Parliament will reconvene today as a result.
This led to a brief surge in demand for Sterling (GBP), amid hopes that MPs would use these extra weeks of parliament to do more to prevent a no-deal Brexit.
However, the Pound’s gains were limited as the news also worsened political and Brexit uncertainties again. As things stand, there is still no clarity at all over how the process will end.
According to Mohamed El-Erian from Allianz:
Good London morning.
It’s hard to overstate the uncertainty/confusion surrounding Brexit and the UK’s political outlook.
I noted last week that even top experts feel unable to specify a confident baseline. Latest legal twist fattens both tails of the distribution of poss outcomes pic.twitter.com/LBRsN5E2tT
— Mohamed A. El-Erian (@elerianm) September 25, 2019
Japanese Yen (JPY) Exchange Rates Mixed on US News and Trade Developments
The Japanese Yen (JPY) is a major safe haven currency and is one of the most appealing currencies on the market in times of global uncertainty.
This safe haven demand helped the Yen to advance against Sterling (GBP) earlier in the week, amid geopolitical tensions between Saudi Arabia and Iran.
On top of this, safe haven demand briefly surged yesterday evening amid news that US House Democrats were beginning a formal impeachment inquiry into US President Donald Trump.
However, support for safe haven demand and the Japanese Yen (JPY) weakened again today.
Markets continued to digest the impeachment news, and jitters softened amid speculation that Trump’s removal from office would be unlikely as the Senate of Congress is still controlled by the Republican Party.
Yen demand was also dampened slightly by concerns that US-Japan trade negotiations were not as close to a deal being reached as previously hoped.
Pound to Japanese Yen (GBP/JPY) Exchange Rates Await Political Developments
Most of the Pound to Japanese Yen (GBP/JPY) exchange rate’s movement today has been due to Pound (GBP) weakness, as no-deal Brexit fears return ahead of UK Parliament reconvening today.
As parliament will reconvene, investors will be closely watching for any action the UK government or MPs take regarding Brexit.
Deepening political uncertainty would weaken the Pound, but signs that a no-deal Brexit could be blocked would help Sterling to advance.
The Japanese Yen (JPY), on the other hand, will continue to be driven by shifts in safe haven demand. US impeachment developments and US-Japan trade news would be particularly influential.
Upcoming Japanese news, including a speech from Bank of Japan (BoJ) Governor Haruhiko Kuroda and Friday’s Tokyo CPI report, could also influence the Pound to Japanese Yen (GBP/JPY) exchange rate.