Pound to Japanese Yen (GBP/JPY) Exchange Rate Dips Despite Falling Japanese Exports in May

GBP/JPY Exchange Rate Falls as Despite Japanese Export Sector Struggling from Covid-19 Crisis

The Pound to Japanese Yen (GBP/JPY) exchange rate dipped by -0.2% today, with the pairing currently trading around ¥134.41.

The Japanese Yen (JPY) rose against the Pound (GBP) despite growing doubts over Japan’s economic health. This follows the report that Japan’s exports sank by -28% in May, while imports suffered a -26% decrease.

Yuri Kageyama, a business analyst at Japan Today, commented on the report:

‘Japan’s growth relies on trade and tourism, as well as domestic small and medium consumer-oriented businesses, all of which have been hurt by the travel, stay-home and social-distancing restrictions aimed at curbing the spread of COVID-19.’

‘The falls by nation were pronounced. Exports to the U.S. plunged by more than 50% and those to Australia declined 59%. Imports from the U.S. fell nearly 28% while those from Australia were down 29%.’

Meanwhile, risk-off markets continue to buoy safe-haven currencies like the Japanese Yen (JPY).

As a result, the JPY/GBP exchange rate has edged higher on fears that China could be seeing the first stages of a possible second wave of the coronavirus.

Pound (GBP) Sinks as UK Inflation Falls to Four-Year Low on Covid-19 Pressures

The Pound (GBP) fell today after the UK inflation rate fell to fresh four-year lows, with the figure falling to 0.5% in May. As a result, some investors are feeling concerned what the Bank of England (BoE) will report about the state of the British economy tomorrow.

Jonathan Athow, the ONS deputy national statistician for economic statistics, commented:

‘The cost of games and toys fell back from last month’s rises, while there was a continued drop in prices at the pump in May, following the huge crude price falls seen in recent months.’

‘Outside these areas, we are seeing few significant changes to the prices in the shops.’

Meanwhile, GBP investors are becoming more optimistic that the UK and the EU could secure a trade deal ahead of the 31st December headline. This follows Prime Minister Boris Johnson’s suggestion that a trade agreement could be reached next month with ‘a bit of oomph’.

Nevertheless, a German government document appear to dampen hopes today. It said:

‘From September the negotiations enter a hot phase. Britain is already escalating threats in Brussels, wants to settle as much as possible in the shortest possible time and hopes to achieve last-minute success in the negotiations.’

Consequently, Sterling traders are in two minds on the UK’s Brexit situation. So, as a result of rising uncertainties over the UK’s economic situation, the GBP/JPY exchange rate has remained subdued.

GBP/JPY Outlook: Could a Gloomy BoE Drag Down Sterling?

Pound (GBP) investors will be keeping a close eye on the Bank of England’s interest rate decision tomorrow. However, with the bank expected to hold rates at 0.1%, we could see little movement for Sterling.

However, if the BoE is notably downbeat about the British economy’s chance at recovery, we could see GBP suffer. Furthermore, any hints at further stimulus measures could have the inverse effect, leaving investors wary of Britain’s flagging economy.

Japanese Yen (JPY) investors will be looking ahead to tomorrow’s Bank of Japan (BoJ) Monetary Policy Meeting Minutes. Any downbeat comments about Japan’s struggling economy would prove JPY-negative.

The GBP/JPY exchange rate will remain driven by risk sentiment this week. Any further signs of a possible second wave of the coronavirus would benefit the safe haven Japanese Yen.