Pound Japanese Yen (GBP/JPY) Exchange Rate Jumps as British Economy Loses £30 Billion in April

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Rallies despite Dire British GDP

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate rallied by over 1% on Friday morning. This left the pairing trading at around ¥135.7320.

Sterling made gains against the Yen this morning despite a slew of disappointing data from the UK.

Data revealed the British economy suffered a record -20.4% decline in April as the country was stuck in a strict coronavirus lockdown.

The record decline is expected to the low point of the slump before the UK begins to drag itself back to the slow road to recovery.

This morning’s data also showed that in the three-months to April, UK GDP slumped by -10.4% when compared to the three months before.

According to Britain’s Chancellor, Rishi Sunak:

‘In line with many other economies around the world, coronavirus is having a severe impact on our economy.’

However, the decline in April means the economy lost around £30 billion, and the contraction is much worse than during the global financial crisis. The Office for National Statistics (ONS) noted:

‘The monthly decline in GDP in April 2020 is three times greater than the fall experienced during the 2008 to 2009 economic downturn. During the global financial crisis, from the peak in February 2008 to the lowest point of March 2009, a total of 13 months, GDP contracted 6.9%.’

Japanese Yen (JPY) Falls as Japan Approves $300 Billion Extra Budget

Meanwhile, the Japanese Yen suffered losses against the Pound after Japanese industrial production slumped by -15% in April.

The final estimate published by the Japanese Ministry of Economy, Trade and Industry (METI) showed annual production tumbled by -15%. April’s month-on-month production slumped by -9.8%.

This likely weighed on the Yen and offered the GBP/JPY exchange rate some support.

Meanwhile, reports revealed that Japan’s parliament approved a record $300 billion second extra budget. This is to fund a stimulus package to help cushion the blow of the coronavirus crisis.

This likely buoyed risk appetite amongst traders and sent the safe-haven Japanese Yen lower.

This is the second supplementary budget for the current fiscal year that started in April, and is worth around ¥31.9 trillion. This will fund part of a $1.1 trillion relief package the Japanese government revealed just a month ago.

Pound Japanese Yen Outlook: Bank of Japan (BoJ) in Focus

Looking ahead, Japanese Yen (JPY) traders will be looking to next week’s Bank of Japan (BoJ) monetary policy meeting.

The Yen could suffer losses against the Pound (GBP) if the bank is overly dovish in its monetary policy statement.

Meanwhile, Sterling gains could be limited as traders continue to worry about ongoing post-Brexit trade negotiations.

As the deadline for the UK to request an extension draws closer, the Pound Japanese Yen (GBP/JPY) exchange rate could be left flat.

Millie Empson

Contact Millie Empson