GBP/JPY Advances after UK Data Supports Pound, Yen Weakness Continues

June 5, 2015 - Written by John Cameron

STORY LINK GBP/JPY Advances after UK Data Supports Pound, Yen Weakness Continues

BOJ Easing Bets Trigger Yen Weakness

The Pound was able to record gains against the Yen on Thursday as the latter currency kept up its bearish act in the market. The Yen has been subject to major softening in recent weeks as investors priced in the possibility of further easing by the Bank of Japan. However, fears for a choppy market are surfacing as a result of the softer Yen exchange rate.

Industry expert Albert Edwards stated: ‘The most important thing as the Yen sets off another round in the global currency war is that China is now in outright deflation and cannot tolerate Renminbi appreciation. As the Yen drags down other regional currencies, and the Renminbi is forced to participate in a competitive devaluation, deflation fears will surely quickly reignite in the west.’

However, the newest Bank of Japan board member Yutaka Harada, suggests that the Yen is in a ‘pretty good place’ after recent declines. The weaker currency is expected to help boost exports and help job growth.

Harada stated: ‘when you look at the improvements in competitiveness across many industries, you could say we’ve reached a pretty good place.’

The central bank’s expansive stimulus programme has helped to weaken the domestic currency—although the BOJ has never stated that it wishes to weaken the currency. Japan has been struggling with deflation for ten years and the monetary policy was designed to combat weak consumer prices and bring inflation to its 2.0% target.

GBP Supported by UK Data

Meanwhile, the Pound’s been buoyant in the market on Thursday after UK data emerged. The UK’s New Car Registrations stat came in at 5.7% on the year in May, an improvement from the previous month’s 5.1%. Additionally, the UK’s House Price data showed an increase from 8.5% to 8.6% in May on the year.

Industry expert Mike Hawes commented: ‘The remarkable growth in demand for plug-in vehicles is expected to continue as the range of ultra-low emission vehicles on sale increases. Meanwhile, we anticipate a natural levelling out of the overall new car market throughout the remainder of 2015.’

BoE Leaves Interest Rates On Hold

Additionally, the Bank of England kept interest rates on hold in June, leaving investors to speculate on whether the central bank saw a diversion in votes on the topic until the release of its meeting minutes later in the month. The past two meetings have seen two members unsure on whether or not to vote in favour of rate increases, but both votes have been unanimous.

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TAGS: Japanese Yen Forecasts