Currency Outlook: GBP/JPY Exchange Rate Trending Higher as Japanese Data Prints Unfavourably and UK House Values Rise

June 11, 2015 - Written by Frank Davies

STORY LINK Currency Outlook: GBP/JPY Exchange Rate Trending Higher as Japanese Data Prints Unfavourably and UK House Values Rise

GBP Exchange Rate Pushes Higher as UK Property Values Rally

The Pound climbed against a host of major peers on Thursday including the Yen after the UK’s latest house price data printed favourably. The UK House Price Balance managed to climb from 32% to 34% in May hitting a nine-month high. However, economists had expected a more favourable leap to 36%. The rise has been accredited to stability offered after the Conservative government remained in power after the highly volatile UK general election.

Economist Simon Rubinsohn commented: ‘There had been some hope that the removal of political uncertainty would encourage more properties onto the market but the initial indications are that this is not proving to be the case. As a result, it is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable.’

UK General Election Result Expected to Promote Currency Market Stability

Although there has been a rise in new buyer enquiries into property since the election, there’s been a lacklustre bounce in property purchases. Many industry experts had expected a hefty recovery with government stability, but it appears as if house prices are climbing without a surge of new buyers ready to make a commitment.

Rubinsohn continued: ‘~Indeed the feedback we are getting in the survey, which points to prices at a headline level rising by another 25% over the next five years, suggests that there is no real confidence that the measures necessary to deliver a meaningful boost to new supply will be put in place anytime soon. Significantly, away from the South East, the strongest price growth is anticipated in the North West which is envisaged to benefit economically from the focus of the government on developing the “Northern Powerhouse” centred on the area.’

Today the GBP/JPY exchange rate was trending in the region of 1.91660

Slide in Japanese Manufacturing Pushes Japanese Yen (JPY) Exchange Rate Lower

Meanwhile, the Yen exchange rate has been softer following some rather unfavourable Japanese data. The latest Japanese manufacturing index came in at -6.0 in Q2 on a quarter-on-quarter basis, following the previous 2.4 reading. However, many Japanese companies are being encouraged to increase their focus on areas such as artificial intelligence in a hope to encourage growth in the economy. The government is attempting to refresh the economy by promoting business start-ups in the sectors in an attempt to have a more cutting-edge economy. Additionally, the use of robots in factories will continue to be promoted under Prime Minister Shinzo Abe’s rule and the final version of the governments growth plans will be out at the end of the month.

Economist Hiroshi Shiraishi commented: ‘The growth strategy will probably cover a lot of ground but will not go into much detail or explain the degree of commitment.’ In other data, Tokyo’s Average Office Vacancies stat shrank from 5.34 to 5.17 in May.

GBP/JPY Exchange Rate Trending in Narrow Range before UK Construction Output Data Today

Ahead of the release of the UK Construction Output data, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trending in the region of 1.91800 - little changed on the day's opening levels. During the Asian session Japan's Tertiary Industry Index came in at -0.2% month-on-month in April rather than 0.4%, as expected. However, Japanese Industrial Production improved and came in at 1.2% on the year and 0.1% on the month. Given that the UK's Construction Output data failed to meet forecasts, the GBP/JPY exchange rate could experience volatility in the hours ahead.

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TAGS: Japanese Yen Forecasts