Pound Japanese Yen (GBP/JPY) Exchange Rate Surges Higher Despite Soft UK GDP Growth

Pound Japanese Yen Exchange Rate Strengthens Despite Weaker-than-Expected Economic Expansion in the UK

The Pound Japanese Yen (GBP/JPY) exchange rate is rallying today despite GDP growth in the UK expanded softer than expected.

At time of writing the GBP/JPY exchange rate is trading around ¥166.8280, over a 1% jump from this morning’s opening levels.

Pound (GBP) Climbs Despite Weaker-than-Expected GDP Expansion

The Pound (GBP) is experiencing mixed success against its peers today. GDP growth data for July fell short of market forecasts as the economy expanded 0.2% MoM.

Despite a softer-than-expected expansion, Sterling found moderate strength as it rebounded from a 0.6% contraction the previous month. The service sector was the main driver for growth, a 0.4% expansion from June. The British economy now sits 1.1% above its pre-Covid level, but the three months up to July shows the economy stalled.

With a stuttering economy, compounded by surging prices and worker shortages, the outlook remains bleak. With another month of expected disruption due to the Queen’s death, an accurate assessment of the UK economy might not be possible until Q4. Yael Selfin, chief economist at KPMG UK warns of an imminent recession, saying:

‘This ties into a downbeat outlook for the UK economy which could see another shallow recession from the end of this year, driven by the ongoing squeeze on households’ income and a rising cost burden for businesses.’

Meanwhile, fears are growing of the cost-of-living crisis moving to a cost of lives crisis. Despite the £150bn fiscal aid plan rolled out by the UK government last week, the World Energy Council (WEC) has warned that it will take more than government intervention for UK households to pull through the winter. Angela Wilkinson, secretary general of the WEC has urged for the British people to unite and show ‘radical generosity’ to each other. 

Japanese Yen (JPY) Remains Subdued as Policy Divergence Widens

The Japanese Yen is under renewed pressure as it drops to its weakest level against the US Dollar in 24 years.

The Bank of Japan (BoJ) has refused to follow other major central banks and has refrained from hiking interest rates. The central bank’s pledge to keep rates ultra-low has seen the Yen continue to slide. Japanese Deputy Chief Cabinet Secretary Seiji Kihara has called upon the Japanese government to intervene and counter the excessive Yen declines.

Calls for relaxing strict border measures would encourage tourism, as Japan’s current visitor cap is hampering the industry. At a time when a weakened currency could prove effective in boosting tourism, relaxing the strict controls could greatly benefit the Japanese Yen.

Pound Japanese Yen Forecast: Strong UK Jobs Data to Boost the Pound?

Looking ahead and the Pound Japanese Yen exchange rate could be further bolstered if UK jobs data prints to forecast. The unemployment rate and claimant count change are set to print positively. With the former remaining steady and the latter set to decline.

Meanwhile, any further news from the government’s plans on intervening to boost the Yen could inspire movement.

Danny Tingle

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