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Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Falls on Dovish BoE and Brexit Anxieties

February 14, 2019 - Written by John Cameron

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Weighed Down by Dovish BoE

Today the Pound Japanese Yen (GBP/JPY) exchange rate fell, due to a dovish Bank of England (BoE) speech and Brexit anxieties, and is currently trading at an inter-bank rate of ¥142.1900.

The Brexit debate in the House of Commons further caused Pound sentiment to slip, with the pairing falling by 0.3%.

The Pound has remained low over the morning following a dovish speech this morning from Bank of England policy maker Gertjan Vlieghe, who said:

‘In the case of a no-deal scenario I judge that an easing or an extended pause in monetary policy is more likely to be the appropriate policy response than a tightening.

‘We will have to judge in real time how well inflation expectations remain anchored, and how households and businesses are reacting to the disruptions.’

Earlier: Japanese Yen (JPY) Slips despite Rise in Japan GDP Growth

Data revealed that Japan’s GDP grew in the period from October to December following the sharp fall in the previous quarter.

Seasonally adjusted GDP grew annually by 1.4% in Q4, in line with forecasts, although this rebound was not strong enough to recover from the 2.5% contraction in Q3.

Following this release, the GBP/JPY exchange rate rose early in the session.

Real exports rose by 0.9% in Q4, the fastest growth in a year.

Despite this increase, exports could suffer if the US and China fail to resolve their trade dispute.

Hiroshi Miyazaki, Senior Economist at Mitsubishi UFJ Morgan Stanley Securities stated:

‘The numbers have rebounded, but Japan is still an economy that is losing momentum.’

US-China tensions remain an issue for the Yen, with Japanese Economy Minister, Toshimitsu Motegi stating:

‘The economy is a gradual recovery as growth is led by private demand […] China-bound exports of information-related materials have weakened as the Chinese economy slowed. We need to monitor uncertainty over global economic outlook including Chinese economy as well as fluctuations in financial markets.’

Yesterday: Pound (GBP) Falls as Inflation Hits Two-Year Low

The Pound Japanese Yen (GBP/JPY) exchange rate fluctuated over the course of the session yesterday, with the UK inflation figure weighing down Sterling.

The year-on-year CPI eased to 1.8% in January, a two-year low, although this drop below the Bank of England’s (BoE) 2% inflation target is expected to be temporary.

The pairing did see some upward support following reports that the dip in inflation offered some much needed relief to households in the run-up to Brexit.

Head of Pensions at Aegon, Kate Smith stated:

‘Inflation fell for the third month in a row to 1.8% in January, the lowest level since January 2017, bringing the 12-month rate finally below the Bank of England’s target of 2%. With the latest wage growth figures showing a positive trend, the gap between earnings and inflation continues to widen and households will feel an ease in the cost of living.

‘In the period of real wage growth, individuals should find themselves in a strong financial position to set out financial goals.’

GBP/JPY Outlook: Will Sterling Gain Support from Increased Retail Sales?

Brexit will remain the main catalyst for movement in the Pound Japanese Yen (GBP/JPY) exchange rate today.

This afternoon’s parliamentary debate and vote is already going on, although the vote is not the ‘high noon’ it was previously billed as.

Sterling could however see an upswing of support following the release of January’s retail sales figures tomorrow.

If monthly retail sales increase by 0.2% as forecast, the GBP/JPY exchange rate could rise.

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