Pound Japanese Yen (GBP/JPY) Exchange Rate Steady as Japan’s First Quarter Growth Contracts Less-Than Expected

GBP/JPY Exchange Rate Rangebound as Japanese Growth Data Fails to Impress Markets

The Pound to Japanese Yen (GBP/JPY) exchange held steady this morning, with the pairing currently trading around ¥138.872.

The Japanese Yen (JPY) failed to gain today following last night’s release of the Japanese GDP report for the first quarter, which edged higher from -0.9% to -0.6%. However, the figure fell below the forecasts of -0.5%, and has left some JPY investors concerned for the Japanese economy going forward.

However, many analysts have expressed fear that Japan’s economy could suffer further in the coming months as the nation’s lockdown restrictions and subdued economic activity could feed into the second quarter.

Stefan Angrick, the senior economist at Oxford Economics, commented:

‘With the bulk of the impact from the coronavirus pandemic to be felt in Q2, the outlook for 2020 thus remains extremely challenging.’

Meanwhile, analysts at Reuters said:

‘Japan’s economy braced for its worst post-war slump even as first-quarter GDP contracted less than initially thought, as the coronavirus crisis slams the brakes on global growth and raises pressure on Tokyo to cushion the blow to business and consumers.’

As a result, we could see the Japanese Yen (JPY) suffer this week if Japan’s economic data continues to point towards a worse-than-expected slump in the months ahead.

Pound (GBP) Steady as Hopes of Easing UK Covid-19 Lockdown Measures Grow

The Pound (GBP) failed to edge higher against the Japanese Yen (JPY) despite growing hopes that the UK could see further easing on the nation’s coronavirus lockdown measures.

According to the Sunday Times, Prime Minister Boris Johnson may be planning to ease restrictions on pubs, cafes, and restaurants from using outdoor areas.

As a result, GBP investors are becoming more optimistic about the UK making a quicker-than-expected economic recovery in the coming months.

Meanwhile, Sterling traders will be looking ahead to today’s release of the BRC retail sales report for May. However, if Britain’s retail sector continues to struggle, then we could see Sterling fall on the UK’s ever-dimming economic outlook.

Asmara Jamaleh, an Economist at Intesa Sanpaolo, commented on the ongoing post-Brexit UK-EU negotiations:

‘The fourth round of negotiations with the EU ended showing no major progress, but sterling seemed unaffected, both because the dominant theme over the past few days has remained the widespread improvement in sentiment tied to the lockdown exit phase, and because, at least formally, the chief negotiators on both sides hinted at the possibility of progress being made in the next few months.’

As a result, many Pound (GBP) traders are concerned that UK-EU post-Brexit talks could end up inconclusive, leading to a possible no-deal from 31st December.

GBP/JPY Outlook: Could Weak Japanese Economic Data Weigh on JPY This Week?

Japanese Yen (JPY) investors will be looking ahead to tomorrow’s release of the Japanese machine tool orders data for May. Any signs of Japan’s industrial sector continuing to struggle would prove JPY-negative.

Tomorrow will also see the release of Japan’s PPI data for May. As a result, we could see the Japanese Yen (JPY) fall as Japan’s economy continues suffer from the coronavirus pandemic.

Tomorrow will see Sir Jon Cunliffe, the Deputy Governor of Financial Stability at the Bank of England (BoE) deliver a speech. However, any downbeat comments about the British economy would be GBP-negative.

The GBP/JPY exchange rate could rise this week if Downing Street announces plans to ease the UK’s Covid-19 lockdown measures.

David Moore

Contact David Moore