Pound Japanese Yen (GBP/JPY) Exchange Rate Wavers as BoE Governor Testifies

Pound Japanese Yen (GBP/JPY) Exchange Rate Fluctuates as MPs Grill BoE over Banking Crisis

The Pound Japanese Yen (GBP/JPY) exchange rate is trading narrowly as Bank of England (BoE) Governor Andrew Bailey testifies to the Treasury Committee over the banking crisis.

At time of writing, the GBP/JPY exchange rate is around ¥161.2540, relatively unchanged from this morning’s opening levels.

Pound (GBP) Supported by Banking Resilience

The Pound (GBP) is struggling for demand this morning as investors focus on Bailey as he faces a barrage of questions over the recent banking collapses in the financial sector.

With fears over the delayed impact of soaring interest rates on the global financial sector, MPs are quizzing the BoE on the collapse and rescue of Silicon Valley Bank UK. Bailey said of the situation and reassured the markets of the strength of the UK banking system:

‘Silicon Valley Bank collapse was fastest since Barings, (and) Credit Suisse was company-specific issue. I don’t think any of these features of recent bank problems are causing stress in the UK. We are in a period of heightened tension and alertness.’

Meanwhile, capping any further losses for Sterling were hawkish comments from Bailey in a speech from last night. Speaking of the central bank’s vigilance to any signs of inflation pressures persisting, Bailey added:

‘If (pressures) become evident, further monetary tightening would be required. The MPC´s response will be firmly anchored in the emerging evidence. Evidence has pointed to more resilient activity in the economy.’

Elsewhere, food price inflation surged to a record high of 15% YoY, an increase from 14.5% in the previous month. Food inflation reached the highest level recorded since records began in 2005. The BoE might be forced to delay their pausing of the tightening cycle and continue to hike interest rates if inflation shows little signs of slowing.

Japanese Yen (JPY) Underpinned by Dovish BoJ

Meanwhile, the Japanese Yen is finding modest success in the wake of comments from an interview with former Bank of Japan (BoJ) board member Makoto Sakurai.

With the incoming BoJ Governor Kazuo Ueda set to take the reins of the central bank in July, concerns over how he will address the yield curve control strategy have spooked JPY investors. But Sakurai does not expect Ueda to make drastic changes to the BoJ’s monetary policy.

Elsewhere, BoJ Governor Haruhiko Kuroda commented that it is still far too early for an exit from easy monetary policy. Kuroda added:

‘Sustainable inflation target has not yet been met. Thus, it’s premature to debate exit from easy monetary policy, more time is needed to stably and sustainably hit the price target.’

Pound Japanese Yen Exchange Rate Forecast: BoE Speech to Boost the Pound?

Looking ahead, the Pound Japanese Yen exchange rate could rely on market sentiment for the rest of the day amid a lack of economic data. Meanwhile, BoE policymaker Catherine Mann is set to speak on monetary policy. If she continues the central bank’s hawkish rhetoric, Sterling could climb.

Meanwhile, a lack of data could leave the Japanese Yen vulnerable to risk appetite. Amidst an improving risk appetite, safe-haven flows could dry up, denting the Japanese Yen.

Danny Tingle

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