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Pound to Yen (GBP/JPY) Exchange Rate Loses Ground as Demand for US Dollar Hits Japanese Currency

July 31, 2014 - Written by David Woodsmith

The Pound to Yen exchange rate (GBP/JPY) softened on Friday after data released during the Asian session painted a mixed picture of the regional economy. Demand for the US Dollar also weighed upon the currency. Sterling meanwhile remained under pressure from Thursday’s disappointing domestic data releases.

The Pound (GBP) fell against the Japanese Yen (JPY) on Thursday after it was weighed upon by disappointing data released early in the session; Sterling also made declines against the Euro (EUR) and US Dollar (USD).

The UK currency was weakened overnight after a report released by the GfK showed that consumer confidence declined for the first time in six months in July. According to the GfK NOP, its headline consumer confidence index fell to a reading of -2 this month from the reading of 1 seen in June. That months figure had been the first positive territory reading seen in more than nine years.

The GfK consumer sentiment index adds to a separate consumer confidence report released last week by Llyods which also showed a decline.

"No sooner had the Index crossed into positive territory last month – for the first time in nearly 10 years – than it fell back into the negative, standing this month at -2. All five of the component parts of the Index fell this month, with four-point drops in both the questions about the country's general economic situation being particularly noticeable. The almost relentless rise of the last six months couldn't continue indefinitely, and the government will be hoping this is just a temporary setback rather than the forerunner of a wider decline in confidence," said Nick Moon, managing director of social research at GfK.

Also weighing upon the UK currency was the release of data which showed that house price inflation growth in the nation eased to its slowest pace in more than a year in July. The data adds to the view that the nation’s housing market is showing signs of cooling down. The fall was also seen to be as a result of the Bank of England’s new policy measures which were designed to limit borrowing and mortgage lending. Earlier in the year BoE Governor Mark Carney highlighted the housing market as the biggest threat to the nation’s economic recovery.

The introduced measures has led to almost 10% fewer mortgages being issued in the second quarter of the year compared to the first three months of the year.

According to the Nationwide Building Society, property values inched higher by just 0.1% in July to an average of £188,949. The rise was the smallest increase seen since April 2013. On a year on year basis, prices advanced by 10.6%, a slowdown from June’s figure of an annual gain of 11.8%, the fastest pace seen since 2005.

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“The slowdown was not entirely unexpected, given mounting evidence of a moderation in activity in recent months. With the Labour market strengthening, mortgage rates expected to remain low and consumer confidence likely to improve, activity is likely to recover in the months ahead, Mortgage approvals declined by almost 20% between January and May, and there has also been some softening in forward looking indicators, such as new buyer enquiries” said Robert Garner, Nationwide’s chief economist.

The Japanese Yen eased against a number of peers including the US Dollar after data released early in the session showed that construction orders and housing starts fell in June.

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