Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Tumbles as BoJ Appoints Kuroda for Second Term

February 16, 2018 - Written by Toni Johnson

STORY LINK Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Tumbles as BoJ Appoints Kuroda for Second Term

Japanese Yen (JPY) Exchange Rates Climb as BoJ Doubles Down on Approach to Stimulus

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate extended its fall on Friday as markets reacted to news that the Bank of Japan (BoJ) has reappointed Haruhiko Kuroda as Chief for another term, with Masazumi Wakatabe - a strong advocate for monetary easing – as Deputy Governor.

This selection helped ease anxieties that the BoJ would be rushing to ease stimulus measures like many of the other major central banks. Instead, the duo is expected to push to maintain stimulus and continue to lead on the basis of ‘Abenomics’ – a focus on monetary easing and fiscal stimulus.

Traditionally markets would be displeased with the prospect of an extended period of stimulus, but many investors are pleased that the central bank will not be rushing into monetary tightening simply because of changing global conditions.

Indeed – the decision is also being considered by some investors to be ‘safer’ and more appropriate for the Japanese economy by comparison, particularly with inflation remaining so soft.

Yasunari Ueno, Chief Market Economist at Mizuho Securities shared this sentiment, stating:

‘The BoJ is in no position to tighten policy anytime soon given rises in the Yen. Contrary to market expectations, the next step could be to ease further if Yen rises persist’.

Pound (GBP) Exchange Rates Down on Soft January Retail Sales

Sterling (GBP) exchange rates took a hit on Friday on news that retail sales in the UK were rather poor in January.

The Office for National Statistics (ONS) reported that overall year-on-year retail sales volume increased by 1.6% in January, beating the previous period’s 1.5% rise by coming up short of the expected 2.5%.

The month-on-month reading also disappointed, printing at 0.1%, above the previous -1.4% contraction but below the forecast of 0.5%.

The reading was, however, supported by a rise in the sales of sporting equipment, with January’s traditional ‘gym rush’ helping to negate a drop in the sale of food goods.

Nonetheless! This news was ultimately disappointing, with markets largely interpreting it as reflecting poorly on the UK’s economy.

GBP/JPY Exchange Rate Forecast: Japanese Trade Balance and UK Wage Figures Ahead

The GPB/JPY exchange rate could see movement on Monday as markets respond to soundbites from UK PM Theresa May’s trip to Germany for talks with German Chancellor Angela Merkel and the annual Munich Security Conference.

This event is expected to extend throughout the weekend, with the Brexit transitional period liable to be front and centre in talks.

Other pertinent events will include Japan’s trade balance, which will be released late on Sunday and the UK’s wage growth readings, due on Wednesday.

In respect to the latter, analysts as well as the Bank of England (BoE) currently expect wages to be on the rise, supported by a tightening labour market.

If this proves to be the case then support for a May rate hike from the BoE could potentially hit fever-pitch levels – an event that could give Sterling renewed support.

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TAGS: Pound Yen Forecasts