Pound to Japanese Yen (GBP/JPY) Exchange Rate Steady as Japanese Economic Sentiment Improves in June

GBP/JPY Exchange Rate Rangebound as Japan Continues to Respond With a ‘Sense of Crisis’ to Covid-19

The Pound to Japanese Yen (GBP/JPY) exchange rate held steady this morning, with the pairing currently trading around ¥134.94.

The Japanese Yen (JPY) failed to rise against the Pound (GBP) despite Japan’s watcher sentiment logging a record rise in June. Japan’s Eco Watchers Survey on economic outlook beat forecasts and rose from 36.5 to 44.

Meanwhile, Japanese Economy Minister Yasutoshi Nishimura has reiterated that there is no need to declare a new state of emergency despite rising Covid-19 cases in the nation.

Mr Yasutoshi added: ‘It is necessary to respond with a sense of crisis.’

JPY has also benefited from investors seeking out safe-haven currencies today. This follows news that several US states are being forced to roll back their efforts to recover their economies as Covid-19 numbers rise.

Cleveland Federal Reserve President Loretta Mester commented:

‘We saw a reopening in May and activity starting to come back pretty well.’

‘Over the past week or so, there’s been some levelling off, and I think it’s probably due to the increase in cases not only in Ohio but across the country.’

Nevertheless, the safe-haven Japanese Yen (JPY) has gained on growing fears for the American economy.

In other Japanese economic news, investors will be awaiting this evening’s release of the manufacturing data for May. Any signs of an increasing in machinery orders would prove JPY-positive.

Pound (GBP) Steady as UK-EU Negotiations Show Signs of Compromise

The Pound (GBP) struggled to gain against JPY today despite fresh reports that the European Union could compromise on the issue of fishing rights. As a result, GBP investors are becoming more optimistic that UK-EU trade negotiations could result in a free trade deal.

EU Chief Brexit Negotiator Michel Barnier was more critical of the possible compromise, saying:

‘Is this balanced agreement the British position as it is? Certainly not.’

‘Is it the European position as it is today? Clearly not. We have two entirely contradictory positions.’

Meanwhile, GBP investors are awaiting UK Chancellor Rishi Sunak’s Summer Statement. Mr. Sunak is expected to announce a three-point strategy to support, protect and retail jobs over fears of a possible 1980s-style increase in unemployment.

Kathleen Henehan, an economist at the Resolution Foundation thinktank, commended the Government’s approach on jobs, commenting:

‘It is very welcome that the government has opted for a bold and ambitious scheme, with £2bn potentially meaning jobs for around 350,000 young people. This is exactly the kind of approach needed, learning the lessons of what worked in the financial crisis.’

GBP/JPY Outlook: Could Improving Japanese Industrial Data Boost the Japanese Yen?

Japanese Yen (JPY) investors will be looking ahead to tomorrow’s release of Japanese Machine Tool Orders for June. Any signs of the Japanese manufacturing sector remaining in the doldrums would prove JPY-negative.

If there’s signs that the British economy is on the road to recovery, then we could see the GBP/JPY exchange rate rise.

The GBP/JPY exchange rate could head downwards, however, if UK-EU negotiations show no signs of process. Conversely, a breakthrough in trade talks could provide a considerable boost for Sterling. As a result, post-Brexit developments will continue to remain in focus this week.

David Moore

Contact David Moore