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GBP to JPY Exchange Rate Trends near 2019 Best as Yen Fails to Capitalise on Safe Haven Demand

February 28, 2019 - Written by Tim Boyer

Despite higher market demand for safe haven currencies yesterday, investors eventually favoured the US Dollar (USD) due to strong US data and as a result the British Pound to Japanese Yen (GBP/JPY) exchange rate was more easily able to hold its best levels all year. The Pound’s Brexit rally ran out of steam, but the currency was still appealing.

Since opening this week at the level of 144.48, GBP/JPY has gained a whopping three Yen in value. GBP/JPY surged on both Tuesday and Wednesday before its gains slowed today, but the pair has been able to hold most of its weekly gains.

At the time of writing, GBP/JPY trended near a 2019 high of 147.98 – which was the pair’s best level since November 2018.

A lack of fresh UK data today meant that the Pound outlook didn’t really change. Some investors sold the British currency from its best levels in profit taking, but it was able to avoid losses versus the Japanese Yen.

GBP Exchange Rates Trend near Best Levels despite Brexit Rally Running out of Steam

The Pound saw a surge in demand across Tuesday and Wednesday, as investors digested news that the UK government had finally confirmed that it would offer options to UK Parliament regarding the issues of no-deal Brexit or a potential Brexit delay.

UK Prime Minister Theresa May said that if her Brexit deal is blocked by Parliament again during the meaningful vote on the 12th of March, the government would offer Parliament a vote on whether or not a no-deal Brexit would be acceptable.

If Parliament votes no to a no-deal Brexit, the government then plans to give Parliament a vote on whether or not to delay the Brexit process slightly – past its current date of the 29th of March.

With the Brexit date now just a month away, market confidence that a no-deal Brexit can be avoided is the primary reason for Sterling’s major gains.

Investors sold the Pound slightly from its best levels yesterday in profit-taking, but optimism kept the currency from falling too far.

Speculation that the Brexit process could still be delayed for as long as two years, rather than the government’s preferred option of just a few months, also helped the Pound to avoid losses today.

JPY Exchange Rate Strength Limited due to Rival Strength

Demand for safe haven currencies like the Japanese Yen was higher on Thursday, but despite this the Pound to Japanese Yen exchange rate continued to trend near its best levels all year.

Earlier in the session, investors were spooked by news that a summit between the US and North Korea had failed, with the nations unable to agree in how to proceed on talks.

Following this, investors became more anxious about geopolitical tensions in general and the recent appeal in risky trade-correlated currencies lightened. According to David Madden, Markets Analyst at CMC Markets in London:

‘The abrupt ending to the Trump-Kim summit encouraged a little selling as it suggests that politics in the region isn't as stable as previously thought, just like the US-China trade situation – not as robust as investors had believed’

Due to this, investors bought safe haven currencies.

However, while the safe haven Japanese Yen was sturdier early in the day, demand for the currency lightened following the publication of some strong US growth stats.

As US data impressed, markets found the US Dollar (USD) the most appealing safe haven currency and this made it easier for the Pound to sustain most of this week’s gains versus the Japanese Yen.

GBP/JPY Exchange Rate Forecast: Japanese Data and Manufacturing Stats Ahead

It’s unlikely that the Japanese Yen will be able to recover much of this week’s losses versus a surging Pound, but it will have a better chance of recovering if upcoming Japanese data impresses investors.

Friday’s Asian session will see the publication of multiple notable Japanese ecostats, including Japan’s January unemployment stats, Tokyo’s February Consumer Price Index (CPI) inflation rate report, and February consumer confidence.

Also notable will be Japan’s final February manufacturing PMI from Nikkei.

If these stats beat expectations, they could make the Japanese Yen more appealing. Japanese Yen demand would rise even further if markets became hungrier for safe haven currencies towards the end of the week.

However, while there is potential for the Japanese Yen to recover there is also potential for the Pound to sustain most of its weekly gains.

If Britain’s February manufacturing PMI from Markit beats expectations during the European session, investors will be more hesitant to sell the Pound from its recent highs as Brexit hopes continue to rise.

As a result, unless there is a surprise in Brexit news or geopolitics the Pound to Japanese Yen exchange rate is likely to sustain most of this week’s gains.
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