Pound Japanese Yen (GBP/JPY) Exchange Rate Sinks Despite Japan’s ‘Fourth Wave’ Covid-19 Fears

GBP/JPY Exchange Rate Sinks as Demand for Safe-Haven Japanese Yen Increases

The Pound Japanese Yen (GBP/JPY) exchange rate fell by -0.5% today following the release of the latest Japanese Consumer Confidence Index for March, which rose above forecasts to 36.1. The pairing is currently fluctuating around ¥150.10.

The safe-haven Japanese Yen has benefited from rising concerns over Europe’s Covid-19 crisis, however, which has driven demand for the currency over the past week.

However, Japanese health authorities are concerned that new Covid-19 variants could behind a nascent fourth wave of the virus in Japan.

Wada, a professor at Tokyo’s International University of Health and Welfare, commented:

‘The fourth wave is going to be larger. We need to start to discuss how we could utilize these targeted measures for the Tokyo area.’

As a result, JPY investors are becoming increasingly jittery around the prospect of a fourth wave, as this would severely impede the nation’s economic recovery.

Pound (GBP) Struggles Despite Strong UK Construction PMI Data

Sterling failed to rise against the Japanese Yen today despite the latest UK Construction PMI figure beating forecasts and rising to 61.7.

Tim Moore, the Economics Director at IHS Markit, was upbeat about the figure, saying:

‘March data revealed a surge in UK construction output as the recovery broadened out from house building to commercial work and civil engineering. Total activity expanded to the greatest extent for six-and-a-half years as residential spending remained robust, commercial projects restarted and infrastructure contract awards moved ahead.’

Nevertheless, UK markets are remaining cautious with fears that Europe’s third-wave of Covid-19 could arrive in Britian in the next few weeks or months.

Prime Minister Boris Johnson previously warned that the virus could ‘wash up’ in the UK.

Added to this, recent developments around the Oxford AstraZeneca vaccine have left some UK investors concerned that this could have a negative impact on the UK’s vaccine rollout.

AstraZeneca is no longer being recognised to those under-30, leaving UK markets concerned that this could dent confidence in vaccinations.

Dr Chris Papadopoulos, principal lecturer in public health at the University of Bedfordshire, said:

‘[Yesterday’s] decision is a severe blow to the public’s vaccine confidence, which is already fragile.’

GBP/JPY Exchange Rate Forecast: Could Safe-Haven Appeal Boost the Japanese Yen?

The Pound (GBP) will continue to be driven by speculation around the UK’s Covid-19 situation.

If the situation continues to improve, with Covid-19 infections falling and the death toll lessening, then the Pound could begin to head higher.

UK markets might also start becoming more optimistic ahead of the 12th April, when some lockdown restrictions will be eased in England.

The Pound Japanese Yen (GBP/JPY) could continue to struggle, however, if risk-off market mood drives up demand for JPY.

David Moore

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