Pound Climbs versus Yen (GBP/JPY) after UK Retail Sales Jump

May 21, 2015 - Written by David Woodsmith

STORY LINK Pound Climbs versus Yen (GBP/JPY) after UK Retail Sales Jump

GBP/JPY Trending Higher as Warm Weather Boosts Spending

The Pound recorded gains against a host of other majors including the Yen when UK Retail Sales data beat economists’ expectations. Year-on-year, UK Retail Sales recorded 4.7% growth including fuel in April after the previous month’s 4.0%. The rise is accredited to a surge in clothing sales as citizens soaked up unusually warm weather.

One ONS official stated: ‘It’s a weather factor. You’ve had warmer than average weather which had led to consumers bringing forward purchases of summer clothing.’

The upbeat ecostat has helped to ease fears inspired by Tuesday’s UK CPI, which saw the nation fall into deflation. The non-core UK Consumer Price Index slipped from 0.0% to -0.1% in April after economists had predicted stagnation. Furthermore, the core measure also took a tumble from 1.0% to 0.8%. Although many industry experts assured that they expect the dip into deflation territory to be temporary, there is still some uncertainty in the market on whether this could be the start of a downward spiral.

Japanese Activity Data Falls Flat

Meanwhile, the Yen was offered little support on Thursday when the Japanese All Industry Activity Index slipped by -1.3% in March rather than the -0.4% estimated. However, the Japanese Manufacturing Purchasing Managers Index came in above expectations by printing at 50.9 in May. Economists had suggested that April’s 49.9 reading would climb to 50.3 this month.

Economist Amy Brownbill commented: ‘Reflective of an overall improvement in operation conditions at Japanese manufacturers was a return to growth of both production and new orders in May. Moreover, the rates of expansion were faster than their respective long-term averages. Subsequently, employment rose at the quickest rate since December last year, while buying activity increased for the third time this year so far.’

BOJ Decisions to Cause Yen Movement

However, the Yen could be in for some serious movement with the Bank of Japan’s monetary policy statement due on Friday with a follow-up press conference from Governor Haruhiko Kuroda. Many economists believe that the central bank could issue more stimulus measures to encourage economic growth and a rise in inflation; therefore the Yen exchange rate could be extremely sensitive on Friday. The Pound exchange rate could also experience movement on Friday with the Public Finances, Public Sector Net Borrowing and Central Government NCR ecostats all due for release. Additionally, central bankers are scheduled to speak which could impact the market significantly. If any hawkish comments are made, the Pound could be offered additional support.

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TAGS: Japanese Yen Forecasts