Pound to Japanese Yen Exchange Rate Hits Weekly High as Safe Haven Currencies Weaken
The Japanese Yen (JPY) is a safe haven currency, so the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been benefitting from risk-on movement this week so far. However, risk-sentiment is limited as US-China trade uncertainties persist.
After opening this week at the interbank level of 143.00, GBP/JPY briefly slipped lower on Pound (GBP) weakness. GBP/JPY has been climbing again since Tuesday.
This morning, GBP/JPY trends near a weekly high of 143.47. The pair is seeing relatively resilient trade, as the Pound steadies from days of poor performance and the Yen is held back by weaker demand for safe havens.
At the same time, the Pound to Yen exchange rate’s gains are limited. Lingering uncertainties over the future of US-China trade relations, could leave the Yen stronger if they take focus.
Pound (GBP) Exchange Rates Resilience Limited as Bank of England (BoE) Concerns Persist
The Pound (GBP) is seeing slightly steadier trade today. It follows days of jittery and weak performance on rising Bank of England (BoE) interest rate cut bets.
A lack of notable UK data due for publication today, is leaving investors readjusting from the developments of the past few days.
While the Pound’s movement has steadied, it is not particularly strong either. Due to weak UK growth on Monday and stagnant inflation data yesterday, Bank of England rate cut bets remain high.
Bets of a January rate cut from the bank are now at around 60%. This is despite the possibility of a rate cut as soon as this month barely being considered a mere week ago.
Some analysts are also speculating that the BoE could be dovish enough to cut rates twice in the coming year.
Japanese Yen (JPY) Exchange Rates Unappealing but Uncertainties Limit Losses
The Japanese Yen (JPY) is a safe haven currency that is often strong in times of market uncertainty.
The Yen saw months of strong performance as the US-China trade war waged on over the past year or so. However, since a ‘phase one’ deal was agreed investors have been selling the Yen in favour of riskier investments again.
This has been the primary cause of JPY losses recently. Even though the US and China formally signed ‘phase one’ this week though, the Yen’s losses have been limited.
While relations are expected to keep improving, analysts are concerned that only some tariffs have been removed or reduced with many still remaining in place.
According to Cecilia Malmström, former EU Trade Commissioner, the lasting tariffs could mean continued economic damage:
Concerning US China deal. De-escalation is good but very few tariffs are actually being reduced. Managed trade not in line with multilateral norms and not really good for the economy either.
— Cecilia Malmström (@MalmstromEU) January 15, 2020
Pound to Japanese Yen (GBP/JPY) Exchange Rate Awaits Bank of England (BoE) Speculation
Part of the Pound’s (GBP) steadier movement today is likely to be market anticipation for tomorrow’s European session, when UK retail sales results from December will be published.
Following poor UK data earlier in the week, investors are anxious that continued weakness in domestic stats could put even more pressure on the BoE to cut interest rates as soon as this month.
Retail sales are forecast to have improved from -0.6% to 0.5% month-on-month, and from 1.0% to 2.6% year-on-year.
If the data falls short, BoE interest rate cut bets will rise and GBP/JPY could shed some of this week’s gains.
The Japanese Yen (JPY), on the other hand, is likely to remain focused on risk sentiment. If US-China trade tensions worsen again, for example, the safe haven Yen will be in for fresh gains.
Tomorrow’s Japanese data, including tertiary industrial index stats from November, could also cause some Pound to Japanese Yen (GBP/JPY) exchange rate movement.