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Pound to Yen Exchange Rate: GBP/JPY Slides on Dovish BoE Comments

March 7, 2019 - Written by John Cameron

Pound Japanese Yen (GBP/JPY) Exchange Rate Falls as Brexit Negotiations Hit an Impasse

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate plummeted over the course of Thursday morning.

The pairing is currently trading at an inter-bank rate of ¥146.5070.

Sterling slipped following reports that said both British and European Union sources said Brexit negotiations had hit an impasse.

There is nothing to suggest anything will change over the next 48 hours during Brexit discussions in Brussels, which has likely dampened sentiment in the Pound.

The Pound slipped following a speech from the Bank of England’s (BoE) Silvana Tenreyro in which she suggested the bank was more likely to cut interest rates.

Suggesting that in the case of a disorderly, no-deal Brexit, the bank was more likely to cut rather than raise interest rates, she said:

‘In my judgement, a situation where the negative demand effects outweigh those other effects is more likely, which would necessitate a loosening in policy. But it is easy to envisage other plausible scenarios requiring the opposite response.’

Japanese Yen (JPY) Rises as US-North Korean Tensions Rise

Data released this morning showed that the Japan Leading Economic Index decreased for the fifth month in a row.

The index slipped from 97.5 to 95.9 in January, however this did little to stop the Pound (GBP) sliding against the Yen (JPY).

It is likely the safe-haven Japanese Yen saw an upswing in support following reports from South Korean media that cargo vehicles had been spotted moving around a factory in Sanumdong in Pyongyang, North Korea.

The site had produced the first intercontinental ballistic missiles (ICBMs) that had the capability of reaching the US.

Pound Japanese Yen Outlook: Will the GBP/JPY Exchange Rate Rise as Japanese Household Spending Slides?

Looking ahead to the start of tomorrow’s Asian session, the Japanese Yen (JPY) could rise against the Pound (GBP) following the release of Japan’s GDP figures.

Japan’s Q4 2018 GDP is forecast to rise by 0.4%, with the annualised rate expected to hit 1.8%, which lent the Yen an upswing in support.

Overall household spending in Japan is also due for release, which could cause the pairing to slip if the figure performs as forecast.

It is predicted that household spending contracted by -0.4% compared to the previous January.

As there is a lack of UK economic data releases, Brexit is also likely to remain one of the main catalysts for the pairing, with the rescheduled second ‘meaningful vote’ possibly causing movement in the pairing.

If MPs vote against Prime Minister Theresa May’s withdrawal agreement, the Pound Japanese Yen (GBP/JPY) exchange rate could fall.

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