Pound Falls against Japanese Yen (GBP/JPY) as Risk Aversion Grows, UK Retail Sales Climb

STORY LINK Pound Falls against Japanese Yen (GBP/JPY) as Risk Aversion Grows, UK Retail Sales Climb

Pound to Yen Exchange Rate (GBP/JPY) Declines as Risk Aversion Grows, UK Retail Sales Climb

The Pound slipped rather dramatically against the Japanese Yen on Thursday despite upbeat UK Retail Sales stats.

The Pound had experienced a good start to the day with UK Retail Sales Including Autos rising by 0.7% in the month of February, much better than January’s -0.3% contraction and the expected 0.4% gain.

Therefore, the annual figure was offered some support, falling from a positively revised 5.9% to 5.7%, rather than sinking to the estimated 4.7%. The strength in Retail Sales was accredited to lower consumer prices. Economist Alan Clarke commented: ‘If you wanted a demonstration that low food and energy prices are good for consumer spending, then this is it. People are clearly not deferring their spending plans amid deflation speculation—they are spending the windfall. This is good news for growth.’

Furthermore, CBI Reported Sales hit 18 in March after February’s 1, with chemists experiencing sales growth close to 17-year highs. Other sectors, such as carpet outlets, also recorded healthy growth. CBI economic director Rain Newton-Smith commented: ‘Sales have recovered following a tough month in February for retailers, and we expect solid growth to continue through Easter. The outlook ahead is looking bright, with household incomes buoyed by zero inflation and improving pay packets, which will continue to encourage spending.’ As many supermarkets have noted softer profits in recent months, it’s hardly surprising that sales in the sector took a hit. Newton-Smith continued: ‘However, the retail sector isn’t in the clear yet, with some companies, especially food retailers, still feeling the heat from stiff price competition.’

Meanwhile, the Yen climbed on account of increased safe-haven demand as a result of geopolitical conflict. Saudi Arabia made the decision to bomb Yemen which caused fears over oil production in the region. In times of crisis, investor sentiment in less-risky assets tends to increase, and the Yen is one currency that can experience an upswing in favour. Industry expert Kengo Suzuki commented: ‘The market mood has turned to risk aversion since yesterday.’ However, Thursday could be an interesting day for the Yen with the release of Japan’s National Consumer Price Index. Household Spending and Jobless Rate stats will also be out on Thursday. However, any escalation in the situation between Saudi Arabia and Yemen could easily push the Yen higher as risk sentiment wanes. Furthermore, the Pound is likely to soften in coming months as investors expect a potential political shakeup in the May general election.

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