Pound Japanese yen (GBP/JPY) exchange rate weakens amid hawkish BoJ pivot
The pound Japanese yen (GBP/JPY) exchange rate is falling today as intervening commentary from Bank of Japan (BoJ) policymakers uplifts the Japanese yen (JPY).
At the time of writing the GBP/JPY exchange rate is trading at around ¥190.644, down approximately 0.3% from this morning’s opening rate.
Japanese yen (JPY) firms amid hawkish BoJ remarks
The Japanese yen is rebounding from fresh lows this morning following a hawkish shift from Bank of Japan policymakers.
After sinking to multi-year lows against some its major peers yesterday amid persisting JPY weakness, a hawkish shift from rate-setters overnight saw JPY climb higher during today’s session.
After delivering its first interest rate hike since 2007 last week, policymakers suggested that further monetary tightening is to come during a news conference yesterday evening.
BoJ hawk and former commercial bank executive Naoki Tamura indicated the possibility of further interest rate hikes, should inflationary pressures intensify.
Tamura said:
‘In my view, the central bank’s ultimate goal is to bring interest rates back to levels where they can be pushed up or down to adjust demand, and influence price moves.
There’s no set formula in terms of conditions for raising rates again.’
Pound (GBP) mixed amid lack of data
The Pound (GBP) is mostly subdued this morning amid a lack of macroeconomic releases, while surmounting Bank of England (BoE) interest rate cut bets prevent any notable movement.
As investors continue to mull over the timing of BoE monetary loosening, economic giants surmise that interest rate cuts could be closer than markets anticipate.
While accounting KMPG giant now pricing in four rate cuts this year, consultancy firm Capital Economics argued that rapidly easing UK inflation paves the way for imminent rate cuts. The firm also expressed concern that failure to enact such cuts could lead to long term economic distress in the UK.
Economists from Capital Economics stated:
‘The UK is on the cusp of switching from having a bigger high inflation problem than other major economies to having a bigger low inflation problem.’
This leaves GBP largely rangebound today, with a lack of upbeat news to boost Sterling’s upside potential. As such, the pound may face subdued trade for the remainder of the session.
Pound Japanese yen exchange rate forecast: Japanese CPI to sink JPY?
Coming up, Japan’s Tokyo consumer price index (CPI) is due for release on Thursday. With inflation due to marginally ease to 2.4% in March, JPY sentiment could sour as domestic CPI continues to cool.
Also due on Thursday is Japan’s unemployment data. With unemployment due to hold steady at 2.4% in February, robust employment may serve to counterbalance the Japanese yen’s potential losses.
Looking to the UK, finalised GDP data is due for release on Thursday. Should the data print as expected, confirming that the economy contracted by 0.3% in the final quarter of 2023, GBP may falter amid confirmation that the UK fell into a technical recession last year.