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GBP JPY Exchange Rate Tumbles as UK Retail Sales Plummet

April 21, 2017 - Written by James Fuller

The Pound Japanese Yen (GBP JPY) exchange rate tumbled from its best levels this morning following the shocking collapse of UK Retail Sales figures last month.

Sterling softened as data released by the ONS showed that sales contracted to -1.8% in March, a major decline from the 1.7% sales growth seen the month before and a far larger decline than the drop to -0.2% that had been forecast by economists.

The disappointing data also led first quarter sales to slump by 1.4%, the largest quarterly fall in the sector since 2010 as consumers appear to be less willing to spend following the drop in the Pound and the surge in inflation.
Kate Davies, senior statistician at the ONS, said;

‘Today’s retail sales figures show a decline on the month and on the three months to March, which coincides with quarter 1 in 2017. This is the first time we’ve seen a quarterly decline since 2013, and it seems to be a consequence of price increases across a whole range of sectors.’

Analysts have also suggested that the outlook for the second quarter is looking equally dire as data released by Retail Economics showed that over 40% of shoppers had adopted a more cautious approach to spending and with the gap between inflation and wage growth expected to grow over the coming months economists predict that consumption will drop even further.

Meanwhile the Japanese Yen has been strengthened by the release of Japan's latest Nikkei Manufacturing PMI flash, which climbed from 52.4 to 52.8 in April.

This is the eighth consecutive month of growth for Japan’s manufacturing sector and was driven by strong rises in output and new export orders, while employment and business confidence also continued to climb.

The outlook amongst the purchasing managers surveyed was also upbeat as the strong domestic and international orders lead many of them to forecast that activity will remain robust in the months to come.

However the Yen’s gains were muted somewhat by recent comments from Bank of Japan (BoJ) Governor Haruhiko Kuroda, who just yesterday stressed the need for the Bank to continue its current policy of easing.

Looking ahead the GBP JPY exchange rate is likely to stumble next week as UK data is expected to cast a shadow over Britain’s current economic situation, with the GDP figures at the end of the week likely to be particularly damaging for the Pound as economists forecast the UK’s first quarter growth will slow.

Meanwhile the Japanese Yen may also suffer next week as the BoJ is expected to leave interest rates at a record low of -0.1% as the bank continues to battle with the strong Yen.

At the time of writing the GBP JPY exchange rate was trending around 139.54 and the JPY GBP exchange rate was trending around 0.007.

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