Pound Japanese Yen (GBP/JPY) Exchange Rate Wavers, Japanese Employment Data Impresses

Pound Japanese Yen (GBP/JPY) Exchange Rate Rangebound on Mixed Economic Stimuli

The Pound Japanese Yen (GBP/JPY) exchange rate is trading in a narrow range this morning, following the overnight publication of Japan’s latest employment data. While the country’s unemployment rate printed favourably, data from the UK subsequently surprised to the upside – although concern over high interest rates is capping Pound (GBP) gains.

At the time of writing, GBP/JPY is trading at ¥182.906, having trended marginally higher in the past 24 hours.

Japanese Yen (JPY) Climbs on Risk-Off Mood

The safe-haven Japanese Yen (JPY) is enjoying tailwinds this morning from a risk-off mood in the markets, amongst other things.

Risk aversion during this morning’s Asian session helped propel the Yen higher against perceived-riskier currencies such as the Australian and New Zealand Dollars (AUD,NZD) – but gains in other exchange rates were capped.

Limiting JPY’s climb may have been weak data from China overnight: economic activity in the country’s manufacturing sector contracted in June as the Caixin manufacturing PMI fell to 49.2. Given the countries’ proximity, weakness in China’s economy can weigh upon the Japanese Yen.

Nevertheless, upbeat employment data also helped support the Yen. Japan’s unemployment rate dropped to 2.5% for the month of June, according to the Ministry of Internal Affairs & Communications.

This marked the lowest jobless rate since January, as the number of unemployed people fell by 40 thousand to 1.73 million and employment swelled to 67.55 million.

Pound (GBP) Enjoys Tentative Gains

The Pound is inching higher against several peers this morning, although gains against the Japanese Yen are modest. Buoying the currency may be a better-than-expected finalised manufacturing PMI: while still in contraction territory, the data printed at 45.3 rather than the forecast 45.

Weighing upon Sterling sentiment, however, are ongoing concerns regarding elevated UK interest rates, the UK’s national debt and the possibility of a recession. While high interest rates represent a rewarding investment for GBP traders, they place strain upon UK businesses and individuals seeking to borrow money.

Furthermore, new figures have revealed that due to the Pound’s depreciation following former PM Liz Truss’s mini budget, the British taxpayer stumped up tens of millions of pounds extra to fund the Brexit divorce bill.

Such dismal news may be dragging on GBP morale: UK debt to the EU swelled by £91 million due to Sterling’s tumble, according to Britain’s finance ministry. The burden of national debt has continued to undermine Pound optimism, as UK government debt rose above 100% of Britain’s GDP for first time since 1961 in June this year.

Finally, risk aversion may be capping Sterling gains. A comparatively risk-on currency, GBP appeal suffers during bearish trading conditions, as investors flock to safe-haven assets.

GBP/JPY Forecast: BoJ Minutes to Direct Movement?

The Pound Japanese Yen exchange rate is likely to trade according to the Bank of Japan (BoJ)’s latest meeting minutes tomorrow, given a lack of additional data from either Japan or the UK.

The BoJ maintained its negative interest rate at –0.1% last week but decided to make its yield curve control policy more flexible. The bank also intimated that the country’s economy is likely to recover moderately: more of this rhetoric could dampen GBP/JPY momentum.

Elsewhere, risk sentiment could influence the Pound Japanese Yen. If the overall market mood remains downbeat, the safe-haven Yen is likely to attract support while the Pound may suffer.


Olivia Evershed

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