Fantasy Currency Trader (Pound to Yen) - Analysts Forecast GBP/JPY Exchange Rate to See Gains

September 30, 2014 - Written by John Cameron

STORY LINK Fantasy Currency Trader (Pound to Yen) - Analysts Forecast GBP/JPY Exchange Rate to See Gains

On 22nd September, our Fantasy Currency Trader feature saw our leading analyst forecast positive movement for the Pound Sterling to Japanese Yen exchange rate (GBP/JPY) from the level of 178.260 which it was then trading at. So how did we get on...?

The recommendation to BUY the Pound Yen exchange rate at 178.260 GBP JPY with a block of GBP10,000 is yet to pay dividends. If you had followed our expert’s advice, your GBP10,000 would currently be worth GBP9,973.30, (at the live GBP JPY trading rate of 177.770). It’s a tiny loss, following a period of sideways trading for Sterling against the Yen, so how is this one likely to work out in the medium term?
The Pound remains anchored by a couple of major concerns which refuse to go away. The initial euphoria following Scotland’s decision to remain part of the United Kingdom has worn off and instead of worrying about a potential break-up of the Union, investors are now concerned that there may be years of internal strife within the UK following British Prime Minister David Cameron’s promise to devolve further powers to the regions. This is a factor which will not go away any time soon.

Meanwhile, the announcement from leading credit ratings agency Moody’s earlier this week that it was stripping the UK economy of its AAA debt rating came as a blow to the UK tender. It was the first time since the ‘Winter of Discontent’ era of 1978 that one of the major global credit ratings agencies had downgraded Britain’s sovereign debt. In truth, although this action was certainly headline grabbing, America’s recent experience of enduring a debt downgrade didn’t stop the dollar’s progress, so the news may not knock our prediction of its rails.

Looking at the other side of the coin, this week has brought the publication of a raft of Japanese data. Today’s jobs data revealed that the level of unemployment in Asia’s second economy had dipped to its lowest level for 17 years last month at 3.5%. On the face of it, this was a Yen-positive release, however as with all economic statistics this was a purely quantitative release and had no qualitative element. Employment market analysts fear that the Japanese economy is generating a large number of part-time and low-paid positions – hardly the stuff of economic miracles, which is what Shinzo Abe has promised.

Other economic indicators this week suggest that Japan remains in an economic funk; August brought an unexpected slump of 1.5% in domestic Industrial Production, which Japanese consumer spending remains at anaemic levels. It appears highly likely that Abe will introduce further monetary policy loosening measures before the end of the year.
For this reason, our recommendation is to HOLD the Pound Yen exchange rate from its current level of 177.770 GBP JPY (current valuation of original GBP10,000 is GBP9,973.30). An ultimate target for the trade comes at August 2007’s multi-decade peak of 251.090.

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TAGS: Currency Predictions Fantasy Currency Trader Forecasts Jap Forecasts