Pound Japanese Yen (GBP/JPY) Exchange Rate Plummets as BoJ Widens Curve Control Policy

Pound Japanese Yen (GBP/JPY) Exchange Rate Plummets as BoJ Adjusts Curve Control Policy

The Pound Japanese Yen (GBP/JPY) exchange rate is nosediving today, following the Bank of Japan’s (BoJ) shift in monetary policy.

At the time of writing, GBP/JPY is trading at around ¥161.2430, showing losses of roughly 3.2% from today’s opening rates.

Japanese Yen (JPY) Skyrockets as BoJ Shifts Yield Curve Policy

The Japanese Yen (JPY) is soaring this morning, following a surprise shift in policy from the Bank of Japan (BoJ).

The BoJ has adjusted its policy towards controlling yield curves, allowing long-term yields to move by 50 basis points. Previously, the policy only allowed moves of 25 bps.

BoJ Governor Haruhiko Kuroda explained the policy further, stating:

‘Today’s step is aimed at improving market functions, thereby helping enhance the effect of our monetary easing. It’s therefore not an interest rate hike. This change will enhance the sustainability of our monetary policy framework. It’s absolutely not a review that will lead to an abandonment of YCC or an exit from easy policy.’

However, investors remain unconvinced that the move won’t open the door to further monetary policy changes. Because of this, JPY investors are beginning to anticipate interest rate hikes, and flocking to support the Yen.

Furthermore, risk-averse market trade is serving to further boost the Yen, due to its nature as a safe-haven currency.

Pound (GBP) Rudderless amid Increasing Industrial Action

The Pound (GBP) is lacking clear direction this morning, as thin trading conditions prompt investors to focus on domestic headlines.

Currently, industrial action is continuing across many sectors in the UK as workers fight for inflation-matching pay packets. Today, the Royal College of Nurses (RCN) is engaging in another walkout, as nurses continue to negotiate.

However, with PM Rishi Sunak closing the door to negotiations and warning strikes may continue, sentiment is waning against GBP. Investors are growing increasingly concerned over the economic impact the action may be having, with little sign of slowdown.

Furthermore, risk-averse market moods are weighing on Sterling, due to it’s increasingly risk sensitive nature.

Pound Japanese Yen (GBP/JPY) Exchange Rate Forecast: UK CBI Retail Data to Weaken Sterling?

Looking ahead for the Pound, tomorrow brings the Confederation of British Industry’s (CBI) retail sales data for December. With a decline from -19 to -23 expected, this may push Sterling lower by reflecting UK retail’s current woes.

For the Japanese Yen, data is thin on the ground until Thursday. Inflation data for November is due to be published and is expected to show an uptick in both headline and core inflation. As such, the Yen may weaken as the BoJ remains committal to its ultra-loose policy.

However, with today’s shock change in tact, the BoJ may surprise investors with a shift towards hawkish action in the accompanying meeting minutes.

John Mulcahey

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