Pound to Japanese Yen Exchange Rate on Track to Sustain Gains amid Risk-Sentiment
Despite the Pound (GBP) falling against many major currencies this week, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has seen strong gains. Investors are selling the safe haven Japanese Yen (JPY) amid a combination of risk-on movement and poor Japanese data.
After opening this week at the interbank level of 143.23, GBP/JPY briefly dipped due to Pound weakness.
Since then though, GBP/JPY has seen considerable gains and is trending near highs of 144.52 at the time of writing today. GBP/JPY’s current highs are the best levels for the pair since New Year’s Day.
The Pound’s strength has been supported slightly by this week’s strong UK data. However, Brexit uncertainty has caused fresh Sterling weakness. This week’s Pound to Yen gains are largely due to Yen losses.
Pound (GBP) Exchange Rates Steady Thanks to Solid UK PMI Projections
This week’s UK data was broadly impressive. Almost all of the week’s key stats beat expectations.
Combined with hopes for higher government spending to be announced at the upcoming budget, investors are becoming hopeful that Britain’s economy will see a rebound this year.
The strong data has helped to offset market jitters over UK-EU relations ahead of Brexit negotiations. Brexit jitters are weighing on Sterling (GBP) in recent sessions, preventing it from holding highs against other major currencies.
However, today’s strong PMI projections for February helped the Pound to hold near its best levels versus the weaker Yen (JPY).
Manufacturing unexpectedly avoided contraction, rising to 51.9 from last month’s stagnant 50.0. The overall composite PMI remained at 53.3, rather than slowing to 52.8 as expected.
The flash UK Composite Output PMI was unchanged at 53.3 in February as the fastest expansion in manufacturing production for 10 months helped offset softer services growth. The overall upturn was the joint-fastest since September 2018. https://t.co/HoIxbAbgaM pic.twitter.com/BualDHokP0
— S&P Global PMI™ (@SPGlobalPMI) February 21, 2020
Japanese Yen (JPY) Exchange Rates Weak amid Risk Sentiment and Dire Japanese Data
The Japanese Yen (JPY) has had a broadly bearish week. It has slumped against most major currencies due to a combination of domestic and global factors.
The Yen’s losses largely came from shifts in market risk-sentiment. This has led to strong gains in its rival the US Dollar (USD).
Concerns about the spread of the coronavirus have softened slightly over the past week. While concerns persist about its impact on global growth, markets hope the spread has slowed for now.
As a result, investors are less eager to hold onto safe haven currencies like the Yen, favouring the US Dollar (USD) as a safe haven due to the strong US economic outlook.
On top of risk-sentiment though, slews of disappointing Japanese data this week have worsened concerns about Japan’s economy. Fears are rising that Japan could be hit hard by the coronavirus, and this is putting further pressure on the Yen.
Pound to Yen (GBP/JPY) Exchange Rate Could Continue Climb if Yen Remains Unappealing
Despite lingering Brexit uncertainty weighing on Sterling (GBP), the British currency has found support in hopes of a UK economic rebound this year.
As a result, if next week’s UK data continues on this strong trend, the Pound could continue to see resilient performance even in the face of Brexit jitters. What’s more, if UK-EU relations show signs of improving the Pound could strengthen even further.
This could help the Pound to Japanese Yen (GBP/JPY) exchange rate to keep climbing if the Japanese Yen continues its current bearish streak.
Unless coronavirus concerns see a sudden turn for the worse again, the Japanese Yen (JPY) won’t benefit much from safe haven demand.
Instead, the Yen could focus more on major upcoming data. Japanese unemployment and retail sales results will be published next Friday for example.
Britain’s economic calendar will be a little quieter. However, strong UK consumer confidence data on Friday could keep the Pound to Japanese Yen (GBP/JPY) exchange rate resilient.