GBP/JPY Climbs Higher, but Economic Worries Remain

April 6, 2017 - Written by Toni Johnson

STORY LINK GBP/JPY Climbs Higher, but Economic Worries Remain

Towards the end of the week’s European session, the British Pound to Japanese Yen exchange rate neared its weekly lows once again due to solid demand for ‘safe haven’ currencies and weakness in the Pound.

The Pound could see an increase in demand next week if Britain’s March Consumer Price Index (CPI) results beat expectations. However, even if they do, any comments from the Bank of England (BoE) brushing off the results could cause the British currency to drop again.

[Previously updated 07/04/2017]

Market jitters continued to shore up the Yen as global geopolitical tensions intensified, leaving the GBP JPY exchange rate on a weaker footing.

Demand for the Pound also diminished in the wake of a raft of dovish UK data, with manufacturing and construction output having unexpectedly contracted on the month in February.

[Previously updated 06/04/2017]

The Pound Sterling to Japanese Yen exchange rate has managed to edge above opening levels to trend around 137.9800.

Both currencies are currently rocked by fears over the state of the UK and Japanese economies; the UK economy appears to be slowing and the Japanese recovery continues to struggle to gain traction.

GBP/JPY Gains despite Worries over Slowing Economy in the First Quarter

Pound Sterling is advancing against the Japanese Yen despite a general downtrend seen elsewhere.

Yesterday’s services PMI initially boosted Sterling with an above-forecast reading of 55, but the fact the UK economy is still set to have slowed in the first quarter of 2017 is keeping investors wary.

According to IHS Markit’s Chris Williamson, ‘The relative weakness of the PMI survey data compared to that seen at the turn of the year suggests the economy will have grown by 0.4% in the first quarter.’

JPY Weakens Even as March Marks Third-Longest Period of Post-War Economic Recovery

Even the news Japan’s current economic recovery is now the third-longest since the Second World War has failed to overly support the Yen against Pound Sterling.

Growth in March will mark 52 consecutive months of expansion, although the data shows that not everyone is feeling the benefits of ‘Abenomics’.

Wage growth remains sluggish, keeping the Bank of Japan (BOJ) locked in a fierce battle to boost inflation, even as company earnings and profits rise.

Compared to the longest period of recovery in the country’s history, which happened during the 2000s, the economy of today remains weak.

Export growth has grown by around 20% and capital investment by 10%, compared to 80% and 20% respectively during the 2000s.

Far from being a cause for celebration, the accolade of third-longest recovery has simply drawn attention to the weakness of the current uptick.

GBP/JPY Exchange Rate Forecast; UK Data Slew to Support Pound?

Considering the main fear regarding the Japanese economy is that wages have failed to tick higher alongside the rest of the economy, tomorrow’s midnight earnings figures are particularly timely.

A slew of UK data will be released once trading has opened, covering industrial, manufacturing and construction output, trade figures and the latest NIESR GDP estimate for March.

Additionally, Bank of England (BoE) Governor Mark Carney is scheduled to give a public address in London, so there is potential for GBP/JPY volatility on the back of policy speculation.

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TAGS: Pound Yen Forecasts