Pound Japanese Yen (GBP/JPY) Exchange Rate Fluctuates amid Mixed Mood
The Pound Japanese Yen (GBP/JPY) exchange rate dropped to a two-week low this morning amid a risk-off market mood. However, the pairing has since managed to recover as the mood shifts and UK data beats expectations.
At the time of writing, the GBP/JPY exchange rate is trading at around ¥185.83, having bounced off an earlier low of ¥185.06.
Japanese Yen (JPY) Unable to Sustain Upside
The safe-haven Japanese Yen (JPY) leapt to a two-week high against the Pound (GBP) this morning as risk aversion continued to sweep markets.
The gloomy mood comes as the ceasefire between Israel and Hamas ended on Friday, dashing hopes that an extension to the truce could pave the way for a peace plan. Markets are now fearful that the conflict could escalate further, potentially spreading to other parts of the region.
However, a downward revision to Japan’s final services PMI overnight has stifled the Yen’s upside potential.
Japan’s service sector PMI score printed at 50.8, revised down from 51.7, pointing to the slowest growth in activity since December last year.
Pound (GBP) Regains Composure as PMI Revised Higher
Meanwhile, after stumbling this morning, the Pound has since managed to recoup its losses against the Yen.
The recovery seemed to come as a slight improvement in the market mood lifted the increasingly risk-sensitive Pound against the safer Yen. Since then, the market mood has soured once again, capping Sterling’s recovery.
An upward revision to the UK’s final services PMI may be keeping GBP afloat, however. The score came in at 50.9, up from the flash estimate of 50.5, confirming a return to expansion in the UK’s vital service sector.
Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey, commented:
‘UK service providers moved back into expansion mode during November as stabilising demand conditions helped to lift business activity from its recent malaise. Although only marginal, the upturn in service sector output was the fastest since July and slightly stronger than the earlier ‘flash’ estimate for November.’
GBP/JPY Exchange Rate Forecast: BoE’s Bailey to Boost the Pound?
Looking ahead, Bank of England (BoE) Governor Andrew Bailey is due to deliver a speech tomorrow morning.
Bailey and his colleagues on the Monetary Policy Committee have recently sought to push back on market expectations for interest rate cuts, arguing that policy will need to remain restrictive for longer than anticipated. If Bailey reiterates this tomorrow then the Pound could catch some bids.
Meanwhile, the Yen may continue to trade on market risk appetite. If sentiment sours then the safer Yen could climb even higher against the Pound.
Some high-impact US data due throughout the week could impact the market mood. Signs of a strong US economy and tight labour market may impact Federal Reserve rate cut bets, which may in turn dampen investors’ appetite for risk and boost JPY’s appeal.