GBP/JPY Exchange Rate Eases as No-Deal Brexit Fears Return
The Pound Japanese Yen (GBP/JPY) exchange rate eased today, with the pairing currently trading around ¥143.189 after the UK Consumer Price Index for November remained at a three-year low of 1.5%, falling well below the Bank of England’s (BoE) target of 2%.
Ruth Gregory, an Analyst at Capital Economics, was downbeat in her analysis, saying:
‘The unchanged rate of inflation was a little above the projection made by the Bank of England in November and the consensus forecast of 1.4%. With inflation well below target, little sign of underlying price pressures and GDP growth running below trend, an interest rate cut on Thursday shouldn’t be completely ruled out.’
Meanwhile, markets continue to react negatively to Prime Minister Boris Johnson’s vow to outlaw an extension to the Brexit ‘transition ‘period’ beyond a late December 2020 deadline.
The rising prospect of a cliff-edge no-deal Brexit next year is leaving Sterling investors feeling jittery, as this would throw Britain into a state of economic uncertainty.
JPY/GBP Exchange Rises Despite Weak Japanese Imports and Exports in November
The Japanese Yen (JPY) rose against the Pound (GBP) today, despite Japanese imports and exports figures falling in November due to the global economic slowdown and ongoing US-China trade disputes.
Takeshi Minami, an analyst at Norinchukin Research Institute, was however upbeat in his analysis, commenting:
‘With signs the worst is over for the global slowdown, exports should come back into positive territory sometime in the first half of next year.’
Meanwhile, Japanese Yen (JPY) investors are focusing on US-China trade developments today, with hopes of a trade deal being struck between the two superpowers after Beijing agreed on the text of a ‘phase one’ trade deal last week.
Morgan Harting, a Fund Manager at Alliance Bernstein, was however critical, saying:
‘We don’t actually know what’s up yet with this trade deal. My inclination is to pay attention to the actual announced policies. Until I see it in something like the Federal Register, then I won’t know what the facts of this deal are.’
Any signs of a breakthrough deal between the two superpowers, however, would benefit the trade-reliant Japanese Yen as hopes for the economy’s recovery return.
GBP/JPY Outlook: Brexit Developments to Continue to Drive Sterling
Japanese Yen (JPY) investors will be looking ahead to tomorrow’s Bank of Japan (BoJ) interest rate decision, which is expected to hold at -0.1%.
Tomorrow will also see the release of the Japanese National CPI figure for November, which is expected to remain at 0.2%. Any surprise improvement, however, could lift market confidence in JPY as the Japanese economy shows some signs of improvement.
Thursday will also see the Bank of England (BoE) announce its interest decision, which is expected to hold at 0.75%. However, any dovish commentary in the BoE’s minutes could weaken the GBP/JPY exchange rate on heightened worries for the British economy post-Brexit.
However, Brexit developments will continue to drive the GBP/JPY exchange rate this week, with any signs of relations between the UK and the EU souring before the end of the year exacerbating no-deal Brexit fears and weakening market confidence in the Pound.