GBP/JPY Exchange Rate Rangebound, Coronavirus Concerns Hold Back Japanese Yen
The Pound to Japanese Yen (GBP/JPY) exchange rate held steady this morning, with the pairing currently fluctuating around ¥143.324 after Japan’s leading economic index for December edged higher from 90.8 to 91.6.
Japan’s economic performance held up well in the final month of 2019. But with rising concerns over China’s coronavirus outbreak weakening the global economy, many Japanese Yen (JPY) traders have remained cautious today.
Economists at Rabobank shared their outlook or the Japanese Yen:
‘We would link the turnaround in the behaviour of the [JPY] with three overlapping factors. The first is that the impact of the coronavirus is very close to home, the second is the step-up in fears that Japan could fall into recession in the current quarter and the third is that the [US Dollar] can offer both liquidity and yield. For these reasons the USD can offer many investors a more practical safe haven.’
Today also saw the release of December’s Japanese Coincident Index, which fell below forecasts from 94.7 to 94.1, leaving some JPY investors concerned over the health of the economy going forward.
GBP/JPY Exchange Rate Steady, No Deal Brexit Fears Cap Sterling’s Gains
The Pound (GBP) clawed back some of its losses this morning in spite of Wall Street bank JP Morgan’s warning of ‘considerable downside’ potential for GBP if the UK and the EU fail to strike a trade deal this year.
Paul Meggyesi, Head of Currency Research at JP Morgan, commented:
‘The risk of no-deal come December, which we continue to believe the market underappreciates and thus underprices, leaves a low ceiling for the currency, but considerable downside.’
Due to a quiet economic calendar this week, and rising fears over China’s coronavirus outbreak, the Pound has performed well against the Euro, due to fears of a German recession and other currencies like the risk-sensitive Australian Dollar.
ING Analysts commented:
‘A quiet week in terms of data releases is going to leave space to the other two key drivers of GBP: UK-EU trade negotiations and hints about the content of the upcoming UK budget.’
The Pound (GBP) has benefited from rising rate cut expectations from the US Federal Reserve, which has provided a boost for the GBP/USD exchange rate today.
GBP/JPY Outlook: Thursday’s Japanese Inflation Report in Focus
Japanese Yen (JPY) investors will be looking ahead to Thursday’s release of the Japanese inflation report for February, which is expected to rise by 0.6%. Any signs of this beating consensus would prove JPY-positive.
Thursday will also see the release of Japan’s flash industrial production gauge for January. If this deteriorates, however, we could see the GBP/JPY exchange rate edge higher on Japanese economic recession fears.
Brexit developments will continue to drive the GBP/JPY exchange rate this week. Any further signs of a no-deal scenario emerging between the UK and the EU would weaken the Pound.