Pound Japanese Yen (GBP/JPY) Exchange Rate Firms as Economists Predict Second Quarter GDP Slump for UK

Pound Japanese Yen (GBP/JPY) Exchange Rate Gains amid Risk-On Mood

The Pound Japanese Yen (GBP/JPY) exchange rate is ticking higher today amid a risk-on trading sentiment. The Bank of England’s (BoE) downbeat assessment for the UK economy may be continuing to cap gains for GBP/JPY, however.

At time of writing the GBP/JPY exchange rate is at around ¥163.2470, which is up roughly 0.2% from this morning’s opening figures.

Pound (GBP) Bolstered Against Yen Despite Recession Fears

The Pound (GBP) is making gains against its risk-averse competitors amid a return of risk appetite today. On the other hand, the currency may be seeing headwinds after the BoE’s gloomy forecasts for the UK economy last week.

Sterling has continued to see a sell-off after the Bank of England’s interest rate decision on Thursday. The central bank rose interest rates by 0.5%, its largest rate hike since 1995. The decision saw little positive movement for the Pound however, with markets have largely priced in the move already.

The downbeat forecasts from the BoE, also on Thursday, are potentially capping any gains for Sterling today. The central bank predicted that inflation could climb past 13% by the end of 2022 which may push the UK economy into a fourth quarter recession.

Predictions that the country’s economy likely contracted in the second quarter of the year may also be weighing on the currency. A survey of economists by Bloomberg released today found a majority aligning with the BoE’s predictions.

Japanese Yen (JPY) Dips as Energy Costs Weigh on Country’s Economy

The Japanese Yen (JPY) is slipping today amid a risk-on market mood. A drop to current account figures may also be weighing on the Yen today.

Figures released today indicated that Japan’s current account printed a deficit for the first time in five months. High energy and raw material costs are thought to be behind the drop as they place pressure on the country’s economy.

The Bank of Japan’s (BoJ) loose monetary policy may also be weighing on JPY today. The central bank is continuing in its goal to push Japan’s growth rate higher through leaving interest rates low.

The BoJ has come under criticism for its stance. Former Bank of Japan board member Goushi Kataoka said:

‘There is concern that there will be moves to make the inflation target in name only. That would destroy the legacy of what the BoJ has achieved so far.’

GBP/JPY Exchange Rate Forecast: Will UK GDP Figures Add to Recession Fears?

Looking to the week ahead for the Pound, further woes for the UK’s retail sector could pull the currency lower if figures print as forecast on Tuesday. The British Retail Consortium’s (BRC) retail sales monitor for July is predicted to fall.

Friday’s GDP figures are likely to the most significant data release for Sterling this week. Current forecasts are predicting the UK economy to contact drastically, with a sharp fall to second quarter growth. The data will likely pull the Pound lower if the figures print as predicted. Additionally, the figures could give extra weight to the BoE’s predictions of a fourth quarter recession.

For the Japanese Yen, a fall to July’s PPI figures could dampen enthusiasm for the currency if figures print as forecast. Investors may see the data as further evidence that BoJ will not raise interest rates in the near-future.

Gareth Monk

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