Pound Japanese Yen Exchange Rate Rockets Following Liz Truss Resignation

Pound Japanese Yen (GBP/JPY) Exchange Rate Soars as Liz Truss Resigns

(Updated 14:04 20/10/22)

The Pound Japanese Yen exchange rate is soaring this afternoon, following the resignation of Liz Truss as Prime Minister. At the time of writing, the GBP/JPY exchange rate is trading around ¥168.8140, a leap of roughly 0.5% from the morning’s opening rates.

With Truss’ resignation, she becomes the shortest serving Prime Minister in the UK’s history, with a term of 45 days. Her resignation caps off the political turmoil over the last couple of days, which has rocked the Pound and UK bond markets.

While investors are reacting positively to the news, it remains to be seen if Truss’ successor will be able to alleviate the current turbulence striking the Pound. Her successor will arrive by the end of next week. However, with the opposition parties calling for an immediate general election, GBP may remain volatile for the coming days and week.

Original article continues below:

Pound Japanese Yen (GBP/JPY) Exchange Rate Flat as UK Political Chaos Continues

The Pound Japanese Yen (GBP/JPY) exchange rate is lacking direction this morning, amid ongoing UK political uncertainty.

At the time of writing the GBP/JPY exchange rate is trading at around ¥167.9520, displaying little movement from the morning’s opening rates.

Pound (GBP) Muted amid Political Uncertainty

The Pound (GBP) is struggling to gain support this morning, as UK political uncertainty continues to weigh on Sterling.

Wednesday saw a chaotic fracking vote and the shock resignation of Suella Braverman. GBP investors are keeping a sharp eye on UK political developments as Liz Truss’s future as Prime Minister looks increasingly in doubt.

A growing number of Conservative MPs are calling for Truss’ resignation today. While her cabinet has affirmed their support, members of the party’s 1922 committee are due to meet later to discuss further actions.

The bond market is reacting to Truss’ future, with gilt prices now climbing following three days of respite. This comes as speculation mounts over whether or not she will last the day, let alone until the upcoming fiscal plan.

This effect the instability is having was explained by Bill Blain, strategist at Shard Capital. He stated:

‘Traders are watching shocked at the slow motion trainwreck of UK Inc, but they are analysing the opportunities. In the next few days things could get even more chaotic as the government self-destruction deepens. Markets want to see credible solutions – and frankly that’s not going to happen…’

Deepening the weight on the Pound and economy is the cost-of-living crisis that continues to grip the UK. Which? conducted a survey of UK households, finding that 9% of households are finding it ‘very difficult to get by’. Half of these struggling households are having to skip meals.

Furthermore, the Bank of England’s deputy governor Ben Broadbent has put a dampener on high rate hike bets, stating that it ‘remains to be seen’ if interest rates will have to rise as much as markets predict.

Japanese Yen (JPY) Muted as JPY Falls Below Key Barrier Against US Dollar

Sombre trade is dampening the Japanese Yen (JPY) this morning, as JPY has fallen below a key barrier of resistance against the US Dollar (USD).

For the first time since 1990, the Yen fell below the level of ¥150 to USD. With both currencies acting as reserve currencies, JPY falling beneath this threshold is significant.

This comes as the Yen continues to decline, the Bank of Japan (BoJ) enacted an emergency bond buying scheme, to try and maintain their 0% interest rate policy.

Pound Japanese Yen (GBP/JPY) Exchange Rate Forecast: Can UK PM Truss Survive the Month?

The current turmoil in UK politics is likely to be the core catalyst of movement on GBP/JPY, as any further developments in Liz Truss’ premiership could inject further volatility.

With September’s UK retail sales figures expected on Friday, the Pound could see further pressure. Sales are forecast to decline for a second consecutive month, which may dent GBP.

For the Yen, investors will be watching the Bank of Japan. Could further market intervention shore-up JPY?

John Mulcahey

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