Pound to Japanese Yen Exchange Rate Climbing amid Brexit Speculation and Poor JP Data
Concerns that UK Parliament could block the new UK-EU Brexit deal have not been enough to push the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate lower this week, as markets remain cautiously optimistic on Brexit.
Since opening this week at the interbank level of 137.12, GBP/JPY has been climbing on hopes for a Brexit deal to be reached. When a new deal finally was announced yesterday, GBP/JPY touched on a high of 140.83, its best level in five months.
While concerns of a lack of domestic support for the Brexit deal left Sterling unable to hold its best levels, GBP/JPY is still on track to have sustained strong gains this week overall.
At the time of writing, GBP/JPY is trending near the level of 140.05.
Pound (GBP) Exchange Rates Sturdy despite Doubts around Brexit Deal’s Domestic Popularity
Yesterday was a big day for the Pound (GBP), as the UK and EU shocked markets by announcing that a new Brexit deal had been successfully reached.
Sterling’s surge in response to the news was brief and limited, amid concerns that the deal lacked support among UK MPs and would not be able to pass through parliament when it sees a vote on Saturday.
Still, the Pound has avoided significant losses and has trended relatively closely to its best levels despite this. This is because analysts believe that the formation of a deal has made a no-deal outcome less likely overall.
According to Jim Reid, Chief Strategist at Deutsche Bank:
‘The reason we think that tomorrow’s vote is less important to the Pound than the striking of the deal itself is that all the major UK parties now support either a second referendum which is unlikely to have no deal on the ballot paper (Liberal Democrats, Labour, SNP), or a concrete deal with the EU (Conservatives),’
Japanese Yen (JPY) Exchange Rates Limp as Inflation Data Disappoints
For much of the week, the Japanese Yen (JPY) has been fairly resilient due to concerns about US-China trade relations bolstering market demand for safe havens,
While the market outlook for US-China trade relations has improved slightly overall, making it easier for the GBP/JPY to sustain strong gains, trade uncertainties are keeping the safe haven Yen from falling too far.
However, the Japanese Yen’s resilience faltered further towards the end of the week.
Poor US data, as well as disappointing Japanese inflation stats, caused Bank of Japan (BoJ) easing speculation to rise, which is weighing on the Yen.
Japan’s inflation rate was expected to edge higher to 0.4% year-on-year, but it instead slowed to just 0.2%.
Pound to Japanese Yen (GBP/JPY) Exchange Rate Anticipating Brexit News amid Final Full Week before Deadline
Amid a lack of major economic data due for publication, as well as it being the final full week before the current 31st of October Brexit date, the Pound to Japanese Yen (GBP/JPY) exchange rate is likely to be driven by development in politics next week.
First of all, the Pound (GBP) could see an immediate reaction to the weekend’s Brexit developments when markets open on Monday.
If UK Parliament blocks the Brexit deal on Saturday, as analysts expect, markets will look for signs of the next step. If Brexit is delayed the Pound could see some relief, but if a no-deal Brexit remains possible Sterling may plunge.
On the small chance that the Brexit deal is passed through parliament, the Pound will rocket. Brexit developments are likely to be the primary cause of GBP/JPY movement next week.
The safe haven Japanese Yen (JPY), on the other hand, will be driven by US-China trade relations. Any major global central bank news could also influence Pound to Japanese Yen (GBP/JPY) exchange rates.