Pound Falls against Japanese Yen (GBP/JPY) as UK Data Leads to Dwindling Investor Sentiment

April 9, 2015 - Written by Tim Boyer

STORY LINK Pound Falls against Japanese Yen (GBP/JPY) as UK Data Leads to Dwindling Investor Sentiment

GBP/JPY Exchange Rate Dips as UK Data Pushes Back Rate Hike Bets

The Pound softened against other majors including the Japanese Yen on Thursday after disheartening UK economic data emerged. As we edge closer to the May general election, downbeat data could sully the reputation of the current government, causing further political uncertainty and damage to the Pound.

The GBP/JPY exchange rate hit a low of 177.3500

The UK’s trade deficit widened far more than economists had estimated, leaving questions surrounding the government’s long term economic plan.

Industry expert John Allan commented: ‘Despite recent positive signs from the UK’s trade deficit, there has been little indication of sustained improvement in overall export performance. This is partly due to challenging conditions in key export markets such as Europe, but it underlines why supporting businesses to export, particularly in emerging markets, must remain at the forefront of policy thinkers’ minds.’

UK House Prices Fall, BoE Leaves Rates on Hold, Pound (GBP) Declines

The Pound was swamped with bad news on Thursday with UK house prices falling a little more than expected. In the three months through March on the year, the UK’s property prices fell from 8.3% to 8.1%, bypassing the 8.2% estimate. However, March recorded a healthy 0.4% rebound rather than the 0.1% expectation.

Industry expert Martin Ellis stated: ‘The recent return to real earnings growth for the first time in several years, very low mortgage rates and last December’s stamp duty changes are supporting housing demand.’

Additionally, the Bank of England (BoE) advocated keeping interest rates on hold in April, to nobody’s particular surprise. The central bank was always unlikely to increase borrowing costs around the time of the general election when the market is so volatile. However, some hawkish investors hope that this year will see the central bank increase borrowing costs for the first time since the onset of the global financial crisis.

The Pound Sterling to Japanese Yen exchange rate fell to a low of 177.3300

Meanwhile, the Japanese Machine Tool Orders figure took a rather large dive in March, falling from 28.9% to 14.6% on the year. Furthermore, the Bank of Japan decided to keep monetary policy stable this week, despite the nation being far from achieving its inflation targets. The programme underwent expansion late last year and many experts suggested further loosening could be in order to help bolster inflation.

BoJ Governor Kuroda commented: ‘Back then, [October] there had been a prolonged effect from the tax hike, and consumption has been quite weak in part due to poor weather. Consumer inflation was weakening every month due to slumping oil prices. When you look at conditions now, inflation expectations have held up, with some indicators showing them strengthening. For now, the risks we saw back in October last year have subsided.’

Still to come on Thursday is Japanese Bank Lending Banks Including and Excluding Trusts figures which are of moderate importance.

UK construction sector figures will follow on Friday.

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