Pound to Japanese Yen Little Changed as both currencies under pressure

May 14, 2015 - Written by Frank Davies

STORY LINK Pound to Japanese Yen Little Changed as both currencies under pressure

Pound to Japanese Yen Little Changed as both currencies under pressure

The Pound Sterling to Japanese Yen was little moved as both currencies were under pressure from domestic issues. In the previous session, the Pound had received support from economic data, which showed that the UK’s unemployment rate slipped to 5.5%, and that employment hit a record high. Following on from that however, the currency softened as the Bank of England (BoE) announced that it had its economic growth forecasts for the next three years.

BoE governor Mark Carney said that the central bank now expects the UK economy to grow by 2.5% in 2015, a drop from the previous expectation of 2.9%. Next year, the nation is forecast to expand by 2.6%, again a drop from 2.9%. The governor also said that he does not expect rates to rise until next year at the earliest. Carney did ad however that he was relaxed about the nation’s low inflation rate and said that the factors, which had driven it to 0%, will be short-lived.

‘A temporary period of falling prices should not be mistaken for widespread and persistent deflation. Overall, despite a moderately weaker outlook for demand growth relative to our February inflation report, a similarly weaker outlook for supply means we continue to expect a sufficient firming in inflationary pressures to return to target within two years,’ said Carney at the inflation report.

The Japanese Yen was also under pressure as news broke that Japan’s Sharp Corp said that it had received a $1.9 billion bailout, the second such bailout received in just three years. The bailout was requested after the company fell deep into the red as its product sales were battered by competition from other rival Asian firms. According to the reports, Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ will pump a combined amount of 200 billion Yen into the company.

The Japanese Yen also came under pressure from domestic data, which showed that stock investment by foreigners dropped sharply in the week ending 9 May. The amount of investment fell from 821 billion Yen to 72.7 billion Yen. Despite the sharp drop, it was better than the -1268.2 billion Yen drop forecast by economists. Machine Tool Orders also rose less than expected. On a year-on-year basis, orders fell from May’s revised figure of 14.9% to 10.4%.

The Japanese Yen could experience more movement in Friday’s session as Bank of Japan Governor Haruhiko Kuroda is due to deliver a speech on the performance of the economy.

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