Pound to Japanese Yen Exchange Rate has Advanced despite Coronavirus Concerns
Despite worsening fears of a global ‘second wave’ of coronavirus infections, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been able to sustain most of last week’s solid gains. Today’s Japanese growth data certainly didn’t offer the Yen (JPY) much support.
After opening last week at the interbank level of 138.26, GBP/JPY spent the week trending with an upside bias. Towards the end of the week, GBP/JPY even briefly touched as high as 140.15 – the best level for the pair in almost half a year since the end of February.
While GBP/JPY ultimately closed the week around the interbank level of 139.53, it was still over a Yen higher.
At the time of writing on Monday morning, GBP/JPY is trending within a relatively narrow region near the week’s opening levels.
Pound (GBP) Exchange Rates Benefit from Rival Weakness amid Lack of Fresh Support
The Pound (GBP) has seen mixed movement in recent weeks.
With Britain’s coronavirus and Brexit outlooks still filled with uncertainties, the British currency’s appeal has been flaky at best, with its movements being driven more by movement in major rival currencies.
As the Yen (JPY) slipped last week, the Pound spent much of the week climbing. Much of the Pound’s gains against some majors has been due to its advances against the US Dollar (USD), as the US outlook worsens.
According to Kenneth Broux, Head of Corporate Research at Societe Generale, there simply isn’t much for Pound investors to react to:
‘It’s summer markets, nothing is going to happen, it’s all about the bond market at the moment,’
Japanese Yen (JPY) Exchange Rates Weighed amid Japan’s Record Contraction
After being dragged lower by a weak US Dollar (USD) for much of last week, investors remain hesitant to buy the Japanese Yen (JPY) this week so far.
Though the Yen is not as influenced by ecostats as other major currencies, investors were broadly concerned with today’s Japanese growth data.
This morning saw the publication of Japan’s Q2 Gross Domestic Product (GDP) growth rate. The data showed a huge quarterly contraction of –7.8% – the worst slump since modern records began in 1955.
— Wandile Sihlobo (@WandileSihlobo) August 17, 2020
Reportedly, it also meant that this had wiped out all the growth Japan’s economy has seen since 2011.
Pound to Japanese Yen (GBP/JPY) Exchange Rate Movement May Remain Limited
Investors may not have much reason to move on the Pound to Japanese Yen (GBP/JPY) exchange rate in the coming week. Unless there are some surprising ecostats or coronavirus developments, the pair may continue to move more on global developments.
Wednesday will see the publication of major stats including Japanese trade balance results and UK inflation data from July. Japanese inflation data and UK retail sales will be published at the end of the week.
Britain’s July inflation rate report is expected to be this week’s most influential dataset for GBP/JPY traders.
Until then, Pound movement will also be sensitive to potential shifts in Britain’s coronavirus situation. According to Yohay Elam, Analyst at FXStreet:
‘Pound traders will want to see the disease remaining under control even if cases continue rising. Any new local lockdowns may weigh on Sterling.’
Overall, the Pound to Japanese Yen (GBP/JPY) exchange rate will be focused on coronavirus and market developments until more surprising data is published.