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British Pound to Yen Exchange Rate Falls despite UK Manufacturing Slipping to a Four-Month Low

March 1, 2019 - Written by John Cameron

Pound Japanese Yen (GBP/JPY) Exchange Rate Rises despite UK Manufacturing Job Losses at Six-Year High

The Pound Yen (GBP/JPY) exchange rate concluded the week at ¥147.76230, some 3% higher since the previous week's open.

Analysts at Scotiabank commented on the Japanese Yen's recent decline in strength.

"JPY weak falling to fresh 2019 lows vs. both USD and EUR; BoJ remains dovish."

The Pound to Yen exchange rate rose on Friday afternoon, trading up at an inter-bank rate of ¥148.20.

The February’s UK Manufacturing PMI slipped to 52 from the previous 52.6, a four-month low.

This was the second-lowest level since July 2016, the month after the Brexit referendum.

Job losses in the manufacturing sector also jumped to a six-year high, although Sterling rose against the Yen.

Commenting on the data, Rob Dobson the Director at IHS Markit, said:

‘Official data confirm that manufacturing is already in recession, and the February PMI offers little evidence that any short-lived boost to output from stock-building is sufficient to claw the sector back into growth territory.

‘Apart from the uncertain outlook, manufacturers also face a darkening backdrop of a domestic market slowdown and weakening inflows of new export business, as global growth decelerates and trade tensions bite. Manufacturing and the broader UK economy therefore face a difficult 2019, with the slowdown being exacerbated later in the year as inventory positions are unwound and Brexit-related headwinds likely to linger.’

Japanese Yen (JPY) Slides as Manufacturing PMI Slips into Contraction

The Japanese Yen (JPY) slid following the release of the Nikkei Japan Manufacturing PMI which showed manufacturing contracted in February.

The data revealed that manufacturing declined at the fastest rate since May 2016, as demand conditions deteriorated at a stronger rate.

Commenting on the data, Joe Hayes, and economist at IHS Markit, said:

‘Sharper reductions in output and demand drove the Japanese manufacturing economy into contraction during the midway point of Q1, compounding reductions already recorded in January. Global trade frictions and weak domestic manufacturing demand pose considerable risks to Japan’s goods producers. As such, firms pared back expectations to near-neutrality. The rebound seen in the official Q4 GDP estimate does not appear to be reflective of underlying economic conditions in Japan.’

Japanese Yen (JPY) Falls as Inflation Misses BoJ Target

On Thursday data showed that inflation had picked up in Japan, although it remained far lower than the Bank of Japan’s (BoJ) target.

The nationwide core consumer price index rose to 0.8% in January compared to the previous year.

Falling short of the BoJ target has reinforced market expectations that Japan is not close to an exit from ultra-loose monetary policy.

Commenting on the data, Takeshi Minami, Chief Economist at the Norinchukin Research Institute said:

‘That means there is still a long way to go to 2% inflation, and the BoJ will probably decide to continue its current monetary easing at its March policy meeting.’

Pound Japanese Yen Outlook: Will GBP/JPY Slide on Weak UK Construction?

Looking ahead to next week, the Pound (GBP) is likely to slip against the Japanese Yen (JPY) following the release of the construction PMI.

February’s Markit construction PMI is forecast to slip from 50.6 to 50.2, which could dampen sentiment in Sterling.

The Japanese Yen could receive an upswing in support on Tuesday following the release of the Markit services PMI.

If growth in the services sector increases from 51.6 to 52.1 as forecast, the Pound Japanese Yen (GBP/JPY) exchange rate could slide.

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