Pound Japanese Yen (GBP/JPY) exchange rate tumbles as Japanese GDP rises
The Pound Japanese Yen (GBP/JPY) is retreating from its recent winning streak this morning following Japan’s latest GDP report.
At the time of writing the GBP/JPY exchange rate is trading at around ¥188.225, down approximately 0.5% from this morning’s opening rate.
Japanese Yen (JPY) firms amid economic growth
The Japanese Yen (JPY) is strengthening this morning despite the latest GDP data missing forecasts of 0.3%.
While todays upwardly revised GDP estimates were weaker than anticipated, a return to growth in the fourth quarter of 2023 boosted JPY sentiment. Following the previous quarter’s 0.8% decline, the Japanese economy grew by 0.1%, as Japan averted a technical recession.
Analysts cited strong capital expenditure as a key factor in Japan’s rebound in the fourth quarter, while ongoing weakness in private consumption limited a more significant economic recovery.
Marcel Thieliant, Head of Asia-Pacific Capital Economics, wrote in a client note:
‘The upward revision to GDP growth in the second estimate released today … was smaller than most had anticipated. While there was a large upward revision to business investment, from the initially reported 0.1% q/q decline to a 2.0% q/q jump, that was partly offset by a drag from inventories and a slightly larger fall in private consumption. Indeed, the figures confirm that consumption has fallen for three consecutive quarters.’
Furthermore, recent speculations surrounding a potentially hawkish shift from Bank of Japan (BoJ) policymakers this month are boosting JPY sentiment
Following a period of economic stagnation and deflation, the BoJ is supposedly warming to the idea of ending negative interest rates in its March meeting, amid hopes hefty pay hikes and solid wages could revive the Japanese economy.
Pound (GBP) mixed amid lack of data
The Pound (GBP) is mixed against the majority of its peers amid a data-light morning for the UK.
A lack of notable macroeconomic releases throughout the session may see Sterling trade without a clear trajectory ahead of this week’s high-impact releases.
In the meantime, news from Reed Recruitment that UK jobs vacancies have fallen to a three-year low could sour Sterling sentiment, dampening hopes of UK economic rebound.
While job vacancies were significantly down, Reed also found that applications were up by 20% last month, compared to February 2023, pointing to a loosening labour market.
Easing UK employment conditions could see Bank of England (BoE) more inclined to ease its monetary policy, with a cooling labour market enabling disinflation.
Further stymieing the increasingly risk-sensitive Pound’s movements in an improving appetite for risk, which leaves GBP to face headwinds as investors favour its safe-haven peers.
Pound Japanese Yen exchange rate forecast: UK jobs data in focus
Looking ahead, the UK’s latest employment figures are due out tomorrow afternoon. With unemployment set to hold steady at 3.8% near multi-year lows, concerns of a cooling labour market could be quietened, thereby lifting the Pound.
Japan’s latest PPI report is due to marginally warm in data due for release this evening. Often used as a precursor to wider inflationary data, rising PPI could boost JPY sentiment amid signs of economic warming.