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Pound to Japanese Yen Exchange Rate Update ? Yen Stronger, UK Confidence Ahead

February 26, 2015 - Written by Ben Hughes

During the European session the Pound softened slightly against the Japanese Yen, shedding around 0.2% over the course of trading to trend in the region of 184.1800. Demand for the Pound was slightly undermined by the news that UK business investment declined in the fourth quarter of 2014. Business investment slipped by -1.4% on a quarter-on-quarter basis, following a positively revised dip of -1.2% in the third quarter. On an annual basis, business investment was up 2.1% in the final three months of last year. Separate figures showed that the UK economy expanded by 0.2% on the quarter and 2.7% on the year – in line with previous estimates.

During the Australasian session the Yen was supported as a policymaker from the Bank of Japan asserted that the central bank shouldn’t look to increase stimulus measures in order to achieve its 2% inflation target. Koji Ishida stated; ‘The BOJ is pressing the accelerator to the floor now. But if inflation picks up pace, there will come a time when it will have to gradually take its foot off the accelerator [...] The need to adjust policy arises when... from a long-term perspective, there is a big risk that Japan will fail to achieve price stability under sustained economic expansion. We don’t peg policy to a specific timing or pace for hitting out 2% inflation target.’ The Yen also advanced on the US Dollar ahead of the publication of the US Consumer Price Index. If inflation in the world’s largest economy falls by more-than-expected, the USD/JPY exchange rate could slide beyond today’s low of 118.6500.

Before the weekend the UK’s GfK Consumer Confidence index could inspire additional GBP/JPY movement. The sentiment measure is believed to have increased from 1 to 2 in February. If that proves to be the case, the Pound could end the week on a high. The UK’s Lloyds Business Barometer is unlikely to have much impact on Sterling trading. Japan is also set to publish several potentially influential reports before the weekend, including inflation data, the retail trade numbers, annual construction output and housing starts figures. Japan’s national consumer price index is expected to print at 2.4% year-on-year in January, either the gauge excluding food and energy achieving 2.1%. Household spending has been predicted to decline by -4.1% on the year following December’s annual figure of -3.4%.

Next week Japanese Yen volatility may be sparked by the Markit/JMMA Manufacturing PMI, Capital Spending figures, Services PMI and the nation’s Coincident and Leading Composite Indexes.

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