Pound to Yen Exchange Rate (GBP/JPY) Lower on Strong Japanese Economic Data

June 26, 2014 - Written by Tim Boyer

STORY LINK Pound to Yen Exchange Rate (GBP/JPY) Lower on Strong Japanese Economic Data

Friday's session saw the Pound to Yen exchange rate (GBP/JPY) weaken as economic reports showed Japan consumer prices had risen at the fastest pace since the early the 80's. The Japanese currency was bolstered as the data was seen as an indicator of a recovering economy.

The National CPI for May was in line with forecasts at 3.4 per cent (annualised), up from 3.2 per cent in April.The unemployment rate also fell to a new low.

The Pound Sterling to Japanese Yen exchange rate is 0.22% pct down on the day at 172.64784 GBP/JPY.

The Pound Sterling was little moved against the Japanese Yen on Thursday but was looking likely to be softer throughout the session as investor’s favour the safe haven Yen as the crisis in Iraq continues to escalate and as worries over Ukraine increased yet again.

Against the US Dollar the Yen climbed after data showed that the US economy shrank far more in the first quarter than economists had been expecting. The contraction seen in the GDP in the world’s largest economy was the worst seen in five years.

According to the Washington based Commerce Department US GDP contracted at a year on year rate of 2.9% in the first quarter of the year. The decline was far worse than the fall forecast by economists. Earlier in the month GDP was initially reported to have inched higher by 0.1% but was then revised downwards to a contraction for a decline of 1.7%. With yesterdays report being far worse than that figure it means that the difference between the second and third revisions was the worst seen since records began in the late 1970s.

Also weighing upon the ‘Greenback’ was the release of data which showed that durable goods orders in the USA fell by 1.0% in May. Economists had been forecasting for a rise of 0.2%. Core durable goods declined by 0.1%, economists had been expecting a rise of 0.4%.

The US Dollar fell against all of its major peers including the Pound as the poor data increased expectations that the Federal Reserve will choose to maintain the nation’s benchmark interest rate on hold at record lows for a longer period of time than hoped.

Further gains for the Japanese Yen were restrained however as the market saw the poor US data as a result of the harsh weather seen in the first quarter of the year. Economists expect the US economy to rebound strongly in the second quarter and data released earlier in the week seems to back up this belief. Consumer confidence and PMI data published earlier in the week all came in stronger than forecast, some a t multi-year highs.

The Yen found further support against perceived riskier assets such as the South African Rand as the markets remain spooked over events in Iraq. The Middle Eastern nation’s Prime Minister Nouri Maliki rejected calls to form a unity government to help battle jihadist fighters invading the country.

"The dangerous goals of forming a national salvation government are not hidden," he said. "It is an attempt by those who are against the constitution to eliminate the young democratic process and steal the votes of the voters."
Mr Maliki committed to start forming a new governing coalition by 1 July.

The Islamic militants led by the terrorist group ISIL continued their advance and launched attacks on one of Iraqs largest air bases located just 80 miles from the capital Baghdad. The failure of the Iraqi army to launch any kind of fight back has raised concerns that other nations will have to intervene if Iraq is to be saved.

Maliki hailed yesterday’s airstrikes by Syrian fighters. He said that he welcomed any attacks upon the militants.

The Yen is likely to see more movement on Friday due to the publication of the latest Japanese inflation, unemployment, core inflation and retail sales data.

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