Pound Japanese Yen (GBP/JPY) Exchange Rate Flat as Barnier Optimistic a Brexit Deal is ‘Possible’

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Muted as EU’s Barnier ‘Confident’ a Deal is ‘Possible’

UPDATE: The Pound Sterling Japanese Yen (GBP/JPY) exchange rate remains flat this afternoon. This left the pairing trading at around ¥135.6080.

Sterling was able to claw back some losses against the Japanese Yen this afternoon after comments from the EU’s chief Brexit negotiator.

Diplomatic sources told Reuters that in a closed-door meeting Michel Barnier expressed confidence that a UK-EU deal was possible.

This was in stark contrast with comments from last week, and according to sources present during the meeting, Mr Barnier said:

‘I remain confident that a balanced and sustainable deal remains possible, even if less ambitious.’

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Slides as Traders Flock to Safe-Haven Yen

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate slumped by around -0.2% this morning. This left the pairing trading at around ¥135.4840.

The safe-haven Japanese Yen was able to benefit at the start of the week as coronavirus cases around the world continued to surge.

Covid-19 cases in the United States showed no signs of slowing down which left markets worried and doubtful of a swift economic rebound.

Deteriorating US-China relations also sent traders flocking to safety and offered the Yen support. This drove JPY to a four-month high against the US Dollar.

The Yen was also able to make gains against a weaker Sterling.

Today saw US diplomatic staff leave their consulate in Chengdu after China’s 72-hour deadline expired. This was in response to Washington’s closure of Beijing’s consulate in Houston, Texas  last week.

Pound (GBP) Struggles Ahead of Latest Round of Brexit Talks

Sterling slumped against the Japanese Yen as the currency did not have any major drivers of its own.

GBP edged higher thanks to a weaker US Dollar. However, uncertainty over ongoing UK-EU talks kept investors wary and on the side-lines.

Last week saw London and Brussels clash over the likelihood of the two reaching a free trade agreement. Britain continued to hold out hope a deal could be reached by September but the European Union deemed this unlikely.

In a note to clients, Petr Krpata, currency and rates strategist at ING wrote:

‘It should be more of the same for GBP this week. It is a very quiet week on the UK data front with the currency to remain the laggard and the underperformer in the European G10 FX space.

‘With news headlines suggesting an increased perceived probability of no deal, there is a little to be optimistic about for GBP.’

Pound Japanese Yen Outlook: Risk Appetite and UK-EU Trade in Focus

Looking ahead, the Japanese Yen (JPY) could continue to rise against the Pound (GBP) if tensions between the US and China continue to increase.

If US-China relations continue to deteriorate and Washington responds to Beijing’s closure of its consulate in Chengdu, traders will continue to flock to the safe-haven Yen.

Sterling traders will be closely watching this week’s latest Brexit negotiations between Britain and the European Union.

If markets are pessimistic about London and Brussels being able to reach a free trade agreement it will weigh on GBP. This will send the Pound Japanese Yen (GBP/JPY) exchange rate lower.

Millie Empson

Contact Millie Empson