Pound Climbs versus Japanese Yen (GBP/JPY) as Risk Sentiment Increases ahead of Friday?s Data

March 5, 2015 - Written by Toni Johnson

STORY LINK Pound Climbs versus Japanese Yen (GBP/JPY) as Risk Sentiment Increases ahead of Friday?s Data

Pound Climbs versus Japanese Yen (GBP/JPY) as Risk Sentiment Increases ahead of Friday’s Data

The Pound advanced against the Japanese Yen on Thursday as safe-haven sentiment waned in anticipation of data out on Friday. US labour market stats are due to emerge in Friday’s trading and could be of major influence for many currencies. Any weak figures could see investor sentiment in the Yen rise as a safe-haven asset. However, in addition, one Bank of Japan policymaker has suggested that the measures implemented by BoJ Governor Haruhiko Kuroda were ridden with risk rather than being helpful for the Japanese economy. Board member Takahide Kiuchi commented: ‘I have concluded that the accompanying positive effects won’t be worth the costs and side effects.’

In October Kiuchi had been one of four policymakers to vote against the expansion of the Bank of Japan’s asset purchases. However, the motion was passed and the BoJ increased asset purchases by 33%. BoJ Governor Kuroda suggested at the February 18th board meeting that the purchases were without risk, saying: ‘I don’t think there are any serious problems developing at this point such as an extremely sharp decrease in liquidity.’

Meanwhile, the Pound remained relatively unchanged as expectations for the Bank of England to keep interest rates on hold at 0.50% were correct. The central bank has seen policymakers become more dovish in recent months as central banks the world over begin loosening monetary policy amid a global slowdown. While the fall in oil prices is responsible for large-scale inflation tumbles in many nations, other factors (such as slowdowns in China) and the Eurozone account for other growth concerns. Although the UK central bank wasn’t expected to hike rates on Thursday, some BoE officials have become slightly more hawkish in recent months, suggesting that a rate hike could occur in the near future—perhaps to counter lower inflation.

Perhaps more importantly, rate cuts seem to be generally ruled out. Economist Howard Archer commented: ‘Despite the further dip in UK consumer price inflation to just 0.3% in January and the very real prospect of deflation in the near term, we believe it is highly unlikely that the Bank of England will cut interest rates.’

The BoE’s main focus in the current climate seems to be geared towards pushing inflation back to the 2.0% target. However, Friday could be a big day for the Pound when the BoE releases its 12-month inflation outlook. Any upbeat figures could bolster the Pound against other currency majors.

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