Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Jumps 0.9%
UPDATE: The Pound Sterling Japanese Yen (GBP/JPY) exchange rate rallied by around 0.9% on Monday afternoon. This left the pairing trading at around ¥135.6510.
Sterling jumped this afternoon, although investors remain cautious of Britain’s bleak outlook and ongoing Brexit risks.
Riskier assets received a boost today after reports revealed the first human trials of another coronavirus vaccine showed promise.
The vaccine being developed by AstraZeneca and Oxford University was safe and produced immune system responses in early clinical trials. This boosted hopes a vaccine could be available by the end of the year.
Britain’s Prime Minister Boris Johnson claimed the results were ‘very positive news’.
However, researchers have emphasised the project was still at an early stage, and vaccine developer Sarah Gilbert noted:
‘There is still much work to be done before we can confirm if our vaccine will help manage the COVID-19 pandemic.
‘We still do not know how strong an immune response we need to provoke to effectively protect against SARS-CoV-2 infection.’
Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Rises as Japan Falls into Worst Post-War Recession
The Pound Sterling Japanese Yen (GBP/JPY) exchange rate edged 0.3% higher on Monday morning as risk appetite rose. This left the pairing trading at around ¥134.9580.
The Japanese Yen struggled at the start of this week after data revealed the country’s exports tumbled.
Japan’s exports fell at a double-digit pace for the fourth consecutive month in June as the coronavirus crisis battered the economy. This suggests Japan has fallen into its worst post-war recession.
Added to this, it also highlights the global economy could suffer a more drawn out and severe downturn.
Data showed shipments to the United States nearly halved and exports to China remained weak. This suggests an absence of a solid growth engine for the global economy.
The Ministry of Finance reported Japanese exports tumble by a worse-than-expected -26.2%. This followed May’s slump of -28.3% which was the worst fall since September 2009.
Commenting on the data, Takeshi Minami, chief economist at Norinchukin Research Institute said:
‘Exports are likely to seesaw for the time being. If domestic and external demand remain sluggish for a prolonged period, supply capacity could be slashed, triggering a jump in bankruptcies and job losses in the latter half of this fiscal year.’
Pound (GBP) Edges Higher as Fifth Round of Brexit Talks Begin
Sterling remained broadly flat, but was able to make gains against a weaker Japanese Yen on Monday morning.
The British currency remained under pressure as hopes for the UK and EU to secure a Brexit deal are fading fast. The fifth round of trade negotiations has begun today which limited GBP gains against JPY.
The Pound has been one of the worst-performing G10 currencies lately, and according to Lee Hardman, currency analyst at MUFG:
‘Incoherent government policy on COVID, the 2nd worst COVID death rate by population in the world, high frequency data that indicates a more subdued recovery, a budget deficit profile that is worse than most other major economies and rising Brexit uncertainties all point to the Pound being singled out as higher risk than most other G10 currencies.’
Meanwhile, over the weekend tensions between the UK and China escalated. British newspapers reported that London would suspend its extradition treaty with Hong Kong.
The Chinese ambassador noted China would respond to any sanctions imposed which also dampened sentiment.
Pound Yen Outlook: Japanese Inflation and Brexit Talks in Focus
Looking ahead to Tuesday, the Japanese Yen (JPY) could suffer further losses against the Pound (GBP) following the release of inflation data.
If Japan’s inflation rate disappoints investors in June, showing further signs of economic weakness, it will weigh on Yen sentiment.
However, Sterling could struggle to make significant gains as attention turns back to Brexit negotiations.
If reports reveal the fifth round of Brexit talks is not progressing as well as hoped, it will weigh on the Pound. This will leave the Pound Japanese Yen (GBP/JPY) exchange rate flat.