GBP to JPY Exchange Rate Continues to Tumble as Brexit Concerns Return

December 15, 2017 - Written by Tim Boyer

STORY LINK GBP to JPY Exchange Rate Continues to Tumble as Brexit Concerns Return

Concerns that the vital UK-EU Brexit trade talks may not begin until March 2018 have left the Pound unappealing on Friday and the British Pound to Japanese Yen exchange rate fell. The Yen has been benefitting from weaker US Dollar (USD) trade.

Since opening the week at the level of 151.85, the GBP/JPY exchange rate has tumbled. On Friday, the pair trended near a weekly low of 149.97.

GBP Weak as Concerns on Future Brexit Talks Rise

While EU leaders confirmed on Friday that Brexit negotiations had successfully passed the first phase, the Pound saw poor performance and dropped against many major rivals.

Despite recent UK ecostats beating expectations, the reality of the Brexit is still sinking in for traders - with the exit date still set for March 2019.

Amid news that UK-EU trade talks may not begin until March 2018, this could leave negotiators with less than a year to agree to a vital post-Brexit transition period or trade deal.

Connor Campbell from Spreadex explained why Pound investors were gloomy on Friday;

‘The Pound went from wary to worried this Friday, as investors fretted over the Brexit difficulties that lie ahead.

Time to think it the last thing sterling needs at the moment. Whenever UK investors have a spare second, thoughts tend to turn to the loud tick of the Brexit bomb. And even with the progress seen in the last couple of weeks – and the ...EU formally agreeing to move on to the next phase of negotiations this Friday – there’s still not a lot for the Pound to actually be thankful for.’

Essentially, despite optimism from UK and EU officials, the Brexit process is still happening and there is still high uncertainty about whether or not trade talks will be successful.

JPY Benefits from Weakness in USD Trade

The Japanese Yen was able to easily gain against the Pound in late-week trade.

Markets found the Yen more appealing due to weakness in its rival, the US Dollar (USD).

USD has seen weaker performance due to uncertainty and caution from the Federal Reserve’s latest policy decision, as well as fresh doubts about the potential success of the Republican Party’s tax bill plans.

US tax plans were previously seen as having a strong chance of passing through Congress, but an unexpected Democrat Party win in an Alabama Senate special election has left the Republican Party’s Senate majority weaker.

The Yen itself has also been supported by expectations that Japan will see its 12th straight month of rising exports when Japan’s November trade balance report is published on Monday morning.

According to Mana Saito from Dai-ichi Life Research Institute;

‘The data will confirm exports are on a rising trend as the global economy is expanding,’

Recent Japanese data has been relatively strong too. A major ‘tankan’ survey was published during Friday’s Asian session and the large manufacturers’ index beat expectations with a figure of 25.

This was the highest figure for the print in 11 years and indicated that Japan’s economy was seeing stronger momentum from rising exports and corporate profits.

GBP/JPY Forecast: Brexit News to Remain in Focus

Amid a lack of notable UK ecostats due until next Friday’s Q3 Gross Domestic Product (GDP) results, the Pound is likely to react to Brexit news for most of next week’s trade.

If investors are given reason to be more optimistic about the second phase of Brexit negotiations, the Pound could see stronger demand.

However, if concerns about the pace of negotiations or the potential failure of trade talks persist, significant pressure will remain on Sterling trade.

As for the Japanese Yen, major Japanese data and news will come in next week including November’s trade balance results and December’s Bank of Japan (BoJ) policy decision.

Analysts expect the BoJ will scrutinise the ‘tankan’ survey and trade data during its policy decision and the bank’s outlook on the Japanese economy could influence Japanese Yen trade.

The Yen is also likely to continue to be affected by the strength of the US Dollar (USD), so investors will be watching for US tax bill news too.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Yen Forecasts