Best Pound to Yen Rate, GBP/JPY Climbs to 2008 High on Strong Sterling

July 3, 2014 - Written by Tim Boyer

STORY LINK Best Pound to Yen Rate, GBP/JPY Climbs to 2008 High on Strong Sterling

The GBP Sterling continued its broad rise against its major peers on Thursday and the Pound to Yen (JPY) exchange rate was able to advance to its best level since October 2008 as a run of strong data reports continued to increase expectations that the Bank of England will raise interest rates by the end of this year.

As the session progressed Sterling eased slightly against the Yen as data released by Markit showed that activity in the UK’s dominant service sector eased slightly last month. Despite the fall in activity the report still indicated that the sector was booming.

On Thursday, the Pound Sterling to Japanese Yen exchange rate is 0.03 pct greater than Wednesday's close at 174.79974 GBP/JPY.

With the UK enjoying a run of strong data releases investors tend to react negatively to anything that deviates from the upward momentum seen in recent months even if the figure would normally be classed as good. Compared to the Eurozone etc... The UK is rapidly diverging and could see GDP reach a new record high in the next quarter of the year.

Pound Sterling (GBP) Softens on PMI for Service Sector

Sterling dipped slightly after the purchasing manager’s index for the UK service sector dipped to a reading of 57.7 in June, a dip from the 58.6 figure seen in May and was below economist forecasts for a number of 58.3.

The currency shrugged it off however as the report also showed that employment in the services sector increased by a record amount last month. The employment component of the data increased to 58.8 from 56.2 .

“The economy is firing on all cylinders. The persistent strength of the PMI surveys raises the likelihood of policy makers deciding that a pre-emptive rise in interest rates later this year is warranted, especially given the speed at which the labour market is improving,” said Chris Williamson, chief economist at Markit.

Economists are forecasting that the Bank of England will raise rates as early as next February but concede that if data continues to outperform expectations then a rare rise before the end of December is a possibility.

“Booming employment strengthens the case for a November rate hike.

The PMIs signal that further very rapid falls in unemployment are in prospect, which will put pressure on the BoE to hike rates earlier than they may have been planning on a few months ago. We expect the first rate hike in November this year.

Services firms reported a record increase in payrolls in June, while manufacturers said jobs numbers increased the most in 39 months. The tightening labour market is feeding through to better wage growth according to the PMIs. Services firms reported stronger pay growth, while construction firms recorded rapid input cost inflation,” said the chief economist at Berenberg.

Japanese Yen Exchange Rate Finds Support on Saudi's Military Action

The Yen was finding support after Saudi Arabia deployed 30,000 soldiers to the Iraqi border as the kingdom is concerned over the threat posed by members of the militant ISIL terror group. In a sign of escalation Iran announced that it has supplied Iraq with a number of attack jets, the news came just days after Russia said that it too had delivered aircraft.

With no more domestic data due for the Yen the next movement is likely to occur next week with the publication of the latest Japanese Current Account.

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