GBP/JPY Climbs as Yen Weakness Continues despite Disappointing UK Growth Reading

May 28, 2015 - Written by Frank Davies

STORY LINK GBP/JPY Climbs as Yen Weakness Continues despite Disappointing UK Growth Reading

GBP/JPY Holds Steady, UK GDP Holds at 0.3

The Pound advanced against the Yen on Thursday, remaining relatively unchanged despite disappointing UK data releases. The second estimate of UK Gross Domestic Product growth was expected to rise slightly from 2.4% to 2.5% on the year in Q1. However, the ecostat remained the same, while the quarter-on-quarter gauge held at 0.3%.

Industry expert David Smith commented: ‘GDP increase confirmed (for now) at 0.3% in Q1. Stronger production and construction numbers offset by downward revision to services.’

The Office for National Statistics also stated that the UK’s current account deficit was pulling economic growth down.

USD/JPY Hits 12-Year Low

Meanwhile, the Japanese Yen has been softening against a host of other majors and hit a 12-year low against the US Dollar on Thursday. The Bank of Japan released its latest meeting minutes this week and investors fear that although the central bank doesn’t currently have any plans to increase stimulus, it may have to in the near future to boost consumer spending and combat persistently low inflation.

Officials have raised concerns on the Yen’s recent slide which has shown no signs of stopping. The Yen exchange rate has depreciated by over 30% since 2012 when Shinzo Abe was elected as Prime Minister.

Japan’s Chief Cabinet Secretary Yoshihide Suga commented: ‘As agreed by the G20, sudden moves in foreign-exchange markets are undesirable and for the latest moves, we’d like to continue to monitor carefully.’

Credit Agriole representative Yuji Saito weighed in on the matter, saying: ‘Suga’s comments sparked Yen selling to touch the key level. The fact he just reiterated the globally confirmed view is taken by markets to be a tolerance [of Yen softness].’

Japanese Inflation Data Ahead

However, it’s going to be a bumpy ride for the Yen exchange rate this week with Friday seeing the release of an abundance of Japanese data. Japan’s National Consumer Price Index will be out and is expected to decline from 2.3% to 0.6% on the year in April. Additionally, Japanese Household Spending data will emerge and economists are hopeful for 3.4% growth in April on the year after the previous month’s -10.6% figure. The Japanese Jobless Rate number will also be released and is pegged to remain at 3.4% in April. Another data release of influence may be Japan’s Industrial Production number which is also expected to improve on the year, from -1.7% to -0.1% in April.
Additionally, any global shocks or geopolitical tensions could see the Japanese currency rise in popularity as investors seek safe-haven assets.

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TAGS: Japanese Yen Forecasts