Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Edges Higher as UK Bans Public Gatherings
The Pound Sterling Japanese Yen (GBP/JPY) exchange rate edged 0.6% higher this morning, leaving the pairing trading at around ¥129.24.
The safe-haven Japanese Yen suffered losses this morning as risk appetite recovered following Monday’s announcement from the US Federal Reserve.
The Fed announced it would be pulling out all the stops to offer markets as much liquidity as possible.
The US central bank announced several programmes including guarantees for direct loans to companies, purchases of corporate bonds, and a plan to give small and medium sized businesses credit.
According to Kyosuke Suzuki, director of forex at Societe Generale:
‘The market is still nervous about possible moves to cash everything, including unwinding of existing derivative positions.’
Meanwhile, in the UK Prime Minister Boris Johnson announced strict new measures to help slow the spread of Covid-19.
This includes a ban on public gatherings of more than two people and the immediate closure of shops selling non-essential goods.
On Monday evening, Johnson said people should only leave the home where ‘absolutely necessary’. He added that the coronavirus pandemic was the ‘biggest threat this country has faced for decades’.
British PMI Surveys Plummet to Record Low
An increase in risk appetite continued to buoy the Pound this morning despite flash UK PMI data falling to a record low.
March’s preliminary data signalled a record slump in business activity, sending the PMI composite and services PMI to all-time lows. Meanwhile, the manufacturing output index fell to a 92-month low.
This morning’s data highlighted the impact Covid-19 has had on the British economy so far. Dealing it with a more severe blow than any other time since figure were available over 20 years ago.
Commenting on this morning’s data, Group Director at CIPS, Duncan Brock said:
‘Just as the economy began to strengthen at the beginning of the year, the shock of this deepening global health crisis has flung businesses into the abyss, with the worst overall downturn in manufacturing and services for more than two decades.
‘The services sector received the largest blow as citizens reduced their social activity and leisure activities were abandoned. The sector recorded its worst drop in activity since 1996 when the survey began. New orders also took a significant hit as the rapid realisation of the significance of COVID-19 applied an abrupt brake on consumer-facing businesses.
‘As more initiatives are rightly introduced to protect the health of the nation, this emergency will have a long-lasting impact on business life as we know it.’
Pound Japanese Yen Outlook: Bank of Japan and Coronavirus in Focus
The Japanese Yen (JPY) could suffer further losses against the Pound (GBP) following the release of the Bank of Japan’s (BoJ) monetary policy meeting minutes.
If policymakers are overly dovish about the outlook for the country’s economy due to the coronavirus, the Yen will slide.
Meanwhile, a disappointing slew of economic data on Wednesday could leave Sterling under pressure.
If February’s inflation rate and Retail Price Index both disappoint, the Pound Japanese Yen (GBP/JPY) exchange rate will be left flat.