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Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Rises despite UK Inflation at Two-Year Low

February 13, 2019 - Written by John Cameron

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Rises as UK Real Wages Grow

The Pound Japanese Yen (GBP/JPY) exchange rate made gains over the course of the session, with the pairing currently trading at an inter-bank rate of ¥142.95.

This morning, following a slew of disappointing UK data releases, the pairing slid, before rallying on positive real wage growth.

Data showed that UK inflation had slowed to a two-year low, showing a lower-than-forecast annual growth rate of 1.8%.

Despite this, the dip in inflation offered relief to households in the run up to Brexit, with Tej Parikh, Senior Economist at the Institute of Directors noting:

‘For the past two years, households have been squeezed between high prices and weak wage growth. With inflation now at a two-year low and growing upward momentum in pay packets, consumers are less likely to fell less of a pinch on their wallets.’

Safe-Haven Japanese Yen (JPY) Slides on Trump Comments

Japan’s Domestic Corporate Goods Price Index contracted by a further 0.6% in January, with the year-on-year growth a worse-than-expected 0.6%.

This likely dampened sentiment for the Japanese Yen (JPY) as this was the slowest rate of growth for two years.

Comments from US President Donald Trump likely caused the safe-haven Yen to slip, as global risk tensions were eased.

Trump suggested the 1st March US-Sino trade agreement deadline could be eased, as he said:

‘If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while.’

Yesterday: Pound (GBP) Rises on Optimistic Carney

Yesterday the Pound Japanese Yen (GBP/JPY) exchange rate rallied throughout the day, with the pairing rising following BoE Governor, Mark Carney’s speech.

Carney’s optimism that the global economy would see continued growth kept Sterling buoyed as he stated:

‘Global growth is more likely than not to stabilise eventually around its new, modest trend.

[…] But this is a judgement, not a guarantee. The world is a delicate equilibrium. Productivity is weak everywhere. The sustainability of debt burdens depends on interest rates remaining low and global trade remaining open.’

GBP/JPY Outlook: Will better Growth Buoy the Japanese Yen?

The Pound Japanese Yen (GBP/JPY) exchange rate is likely to see movement following the release of the Japanese GDP for Q4 2018.

The pairing could slip as the forecast suggests the figure is going to increase by 0.4%, from the previous contraction of -0.6% in Q3.

Due to an absence of UK data releases, Brexit will remain a main catalyst for movement in the pairing.

Tomorrow will see a debate in Parliament followed by a vote, which could see the Pound lifted if the likelihood of a soft Brexit increases.

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