Pound to Yen Exchange Rate Today - GBP JPY Recovers After Wednesday?s Sterling Flop

August 14, 2014 - Written by David Woodsmith

STORY LINK Pound to Yen Exchange Rate Today - GBP JPY Recovers After Wednesday?s Sterling Flop

Currency News UK - The British Pound to Japanese Yen exchange rate was trending at 170.6800 GBP JPY on Thursday, reaching session highs of 171.2300 and lows of 170.5800. In the latter few days, Sterling has plummeted against all 16 majors in the currency market following a dovish Bank of England (BoE) Inflation Report, and poor UK figures.

Japanese Economic Data Falls Short Indicating Severe Contraction

Thursday’s Japanese Machine Orders figure rose by 8.8% from May’s surprisingly low -14.3%, but still remained in the negative at -3.0%. Today’s data has shown business capital spending has slumped, therefore indicating an effect on business confidence for two consecutive months. Machine Orders plummeted to the -3.0% figure in June, despite economists’ forecasts to attain 3.0%. Numbers such as these have shown the swiftest drop for Japanese machinery orders in the past five years.

Economist Koya Miyamae said that Thursday’s figures have proven to be ‘very weak’, stating: ‘Until private spending and exports are confirmed to clearly rebound, machinery orders and business investment are likely to remain on a weak note.’

Wednesday however, saw the release of highly influential Japanese Gross Domestic Product (GDP) figures which have signalled the largest contraction in the Japanese economy in three years. GDP figures evaluate the overall productivity of goods and services as well as consumer consumption. Wednesday showed a contraction in the Japanese economy of -6.8% in the second quarter, in comparison to the first quarter’s growth of 6.1%.

However, the Japanese economy may be subject to further monetary policy measures from the Bank of Japan (BoJ), following doubts over the feasibility of sustainable growth in Japan. Bank of Toyko-Mitsubishi UFJ representative Takahiro Sekido commented: ‘The market expectation for policy action may grow further, as there are some key political events and issues in Autumn.’

Bank of England’s Former Hawkish Remarks Vanish In Place of Dovish Tone

Meanwhile on Wednesday, the Bank of England disappointed many with their Inflation Report which has shown the BoE’s hopes for wage growth dashed, as they cut their projections for 2014 in half. Furthermore the Inflation Report showed that the UK will not be a recipient of interest rate hikes in the near future as the unanimous vote for Bank Rate has remained, as it has done since 2011.

Thursday has seen Bank of England representative David Miles state that inflation forecasts remain downcast suggesting that interest rates will not be encouraged to rise too swiftly. Monetary Policy Committee (MPC) member Miles explained the pros to the inflation levels residing below the target of 2%. Miles commented: ‘That’s very good news because it means that we’re not going to be pushed into raising interest sharply, because the inflation outlook remains very subdued.’

UK Wage Growth Slumps despite Falling Unemployment Rate

The UK saw Unemployment Levels dip yesterday to 6.4% in June, following May’s 6.5%. Average Weekly Earnings data however showed a -0.2% contraction in June, despite economists only forecasting a -0.1%. Moreover Employment Change only reached 167K, falling far short of the 270K predictions.

With the Bank of England proving more dovish in recent weeks, a swift change from Governor for the Bank of England Mark Carney’s hawkish remarks mid 2014.

Carney suggested that the UK interest rate hikes could happen in the imminent future which drove the Pound to highs against the US Dollar (USD).

However, following this latest Inflation Report, the hopes for any interest rates this side of Christmas which had been formerly speculated about have been quashed. Economist Neil Williams stated: ‘Financial markets are writing off the notion of a rate hike before Christmas.’

Short-term Forecast for GBP/JPY

For now the Pound to Yen exchange rate appears to be slowly climbing out of the depths it tumbled to on Wednesday; however, Friday’s GDP figures will remain a highly influential factor in the Pound exchange rate in the currency market.

Moreover, Japan is not due to release any more data publications this week lending to other movements in the currency market to determine any change. The Japanese Yen is presently residing at 0.0059 versus the Pound.

Japanese Yen Exchange Rate Update - 15/08/2014

The Pound hasn’t moved noticeably against the Japanese Yen on Friday morning, trading at its lowest point at 170.9200 versus 171.1900 at its highest, with only a marginal market movement thus far. The currency market however is anticipating greater fluctuation in the GBP to JPY pairing, with highly influential UK Gross Domestic Product (GDP) figures scheduled for publication at 09:30 GMT. The Pound could gain greatly however as the Yen is destined for a slump in the currency market as safe haven assets become less appealing to investors in the light of the de-escalation of political issues affecting Ukraine and Iraq. Japan will see its currency shift dependent on how other majors perform today in the currency market.

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