Today's Currency News: Pound Sterling, US Dollar, Japanese Yen Forecasts

July 29, 2016 - Written by James Fuller

STORY LINK Today's Currency News: Pound Sterling, US Dollar, Japanese Yen Forecasts

BoJ Policy Statement Impacts Japanese Yen (JPY), US Dollar Exchange Rates

Last night’s monetary policy announcement from the Bank of Japan (BoJ) clearly laid the blame for increased uncertainty in the global markets at the feet of the UK electorate. The policy statement noted that,

‘Against the backdrop of the United Kingdom's vote to leave the European Union and the slowdown in emerging economies, uncertainties surrounding overseas economies have increased and volatile developments have continued in the global financial markets.’

The BoJ went on to assert that,

‘In order to prevent these uncertainties from leading to a deterioration in business confidence and consumer sentiment as well as to ensure smooth funding in foreign currencies by Japanese firms and financial institutions, thereby supporting their proactive economic activities, at the Monetary Policy Meeting (MPM) held today, the Policy Board of the Bank of Japan decided upon the following…’

Japan’s policy statement then went on to announce a doubling of the size of two of its key monetary policy initiatives – its open market purchases of Exchange Traded Funds (ETFs) and its US Dollar fund which, ‘provides its U.S. dollar funds for a period of up to 4 years to support Japanese firms' overseas activities through financial institutions.’

GBP JPY Exchange Rate Slides, What Next for Sterling?

The fact that the BoJ resisted the temptation to trim its benchmark rate of interest from its current record low of -0.10% down to -0.15%, as had been anticipated by analysts, helped the Japanese Yen (currency : JPY) record strong gains against the other sixteen most actively traded global currencies today. The Pound Sterling Yen exchange rate slid to an intraday low of 135.130 GBP JPY as a consequence, while Japan’s policymakers will have been dismayed to watch the USD JPY exchange rate drop to marginally above the 102.000 threshold.

US GDP Sends US Dollar into a Tailspin

Elsewhere, a shockingly poor set of US Gross Domestic Product data, published earlier this afternoon, has triggered a rapid reassessment of the US Federal Reserve’s likely monetary policy path by investors. The benchmark year-on-year Q2 growth number showed at an annualised 1.2% versus an expected 2.5% and, to add insult to injury, the US Q1 GDP figure was downwardly revised to a lowly 0.8%. The news sent the Pound US Dollar exchange rate hurtling higher, with the pair breaking back above 1.3300 GBP USD a short time ago.

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