Pound Japanese Yen Exchange Rate Holds Ground Near Best Levels

Pound Japanese Yen Exchange Rate Avoids Losses on UK Vaccine Hopes 

Broad demand for the Pound (GBP) is helping the Pound Japanese Yen (GBP/JPY) exchange rate to avoid losses this week. The Japanese Yen (JPY) is struggling to capitalise on market sentiment as well, due to strength in its rival the US Dollar (USD). 

Last week was a highly bullish one for GBP/JPY, with the pair climbing from the level of 142.00 to 143.50 throughout the week. 

This week’s movement has been comparatively narrow and jittery though. GBP/JPY continues to trend close to the week’s opening levels as the Pound attempts to hold near its best levels and the Yen attempts to recover. 

On Monday, GBP/JPY touched on near yearly high of 144.06. It was the best level for GBP/JPY since February 2020. 

Pound (GBP) Exchange Rates Remain Appealing as UK Services Report Beats Forecasts 

Investors find the Pound appealing this week, amid expectations that Britain’s coronavirus vaccine programmes will help the British economy to recover sooner than some other major economies. 

While this has been the primary cause of Pound gains, the British currency’s appeal has been further supported by UK data this week. 

Britain’s January PMI results from Markit were generally better than projected, indicating that Britain’s economic activity was hit less by January’s UK national lockdown than feared. 

Today’s key UK services PMI still showed a concerning contraction of 45.4, but this was better than the forecast 45. 

Overall, vaccine hopes are fuelling more optimism from markets and investors over Britain’s longer term outlook. 

Japanese Yen (JPY) Exchange Rates Struggles amid Rival Strength 

The Japanese Yen is a safe haven currency. It often benefits in times of market uncertainty when investors are too cautious to take risks. 

However, while there has been some risk-aversion over the past week, the Japanese Yen has failed to benefit much from its. This has been due largely to a strong rebound in demand for the Yen’s rival, the US Dollar. 

According to Valentin Marinov, Head of G10 FX Research at Credit Agricole: 

‘It’s a very interesting move especially given that at the same time global equity indices would suggest that risk sentiment is not improving as much to justify the move, 

It also highlights that the primary driver of that could be the growing yield advantage of the Dollar over low yielding currencies like the Yen, the Swiss Franc,’ 

Pound Japanese Yen (GBP/JPY) Exchange Rate Could Hit New Highs if Bank of England (BoE) Impresses 

Pound to Japanese Yen exchange rate investors are likely to remain focused on the Pound through the end of the week. 

Thursday will see the Bank of England (BoE) hold its February policy decision. Though the bank is not expected to make any changes to monetary policy, the bank’s tone on Britain’s economic and coronavirus outlooks will be closely watched. 

If the BoE takes a more dovish tone on Britain’s outlook due to the coronavirus pandemic, the Pound is likely to weaken. If markets remain fairly risk-averse, the Yen could take advantage of this and push GBP/JPY lower. 

The Yen is likely to remain driven by shifts in market sentiment and weakness in its rival the US Dollar. No notable Japanese data is due for publication in the coming sessions. 

Tomorrow’s UK construction PMI is likely to be overshadowed by BoE news and risk-sentiment for the Pound to Japanese Yen (GBP/JPY) exchange rate. 

Josh Jeffery

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