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Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Slips on Uncertainty over PM?s Third ?Meaningful Vote?

March 18, 2019 - Written by John Cameron

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Falls as Third ‘Meaningful Vote’ Edges Closer

The Pound Japanese Yen (GBP/JPY) exchange rate slipped over the course of Monday as Brexit pessimism weighed on Sterling.

The pairing is currently trading at an inter-bank rate of ¥147.47.

Sterling continues to struggle to hold onto last week’s gains as traders contemplate Brexit possibilities that have now opened up, including a general election.

Uncertainty has emerged over whether Theresa May’s Brexit withdrawal agreement will be put to a vote for the third time this week.

Later in the afternoon it was revealed that John Bercow has ruled out the vote if the agreement remains ‘substantially the same’ as MPs could not be asked to vote on precisely the same subject twice.

Meanwhile, Foreign Secretary, Jeremy Hunt has said that a ‘lot more work’ is required to get MPs to back the Prime Minister’s deal, although there were ‘encouraging signs’ that objecting MPs were coming around.

Hunt also said that the third ‘meaningful vote’ would only be held before Thursday’s European Union summit if ministers were ‘confident’ of a victory.

Japanese Yen (JPY) Rises as Industrial Production Contracts

Early Monday morning saw the release of the Japanese industrial production did not contract as far as forecast.

Monthly production slipped to -3.4%, rather than the predicted -3.7%.

However, there has not been any growth in Japan’s industrial production since October 2018.

Annual production rose by 0.3% in January, the largest annual rise since November 2018.

Japanese Yen (JPY) Rises despite Falling Japanese Exports

Data released at the start of this week’s session showed that Japan’s exports fell for the third consecutive month in February.

This is a sign of the growing strain on the trade-reliant Japanese economy, which may suggest the Bank of Japan will be forced to offer more stimulus.

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

‘Exports to advanced nations like the United States and Europe still held firm, but China- and Asia-bound shipments were clearly sluggish.

‘Exports will remain in a declining trend for the time being, which could curb capital spending and wages. Domestic economy will face a severe situation ahead of October’s sales tax hike.’

Pound (GBP) Weighed Down as UK Rightmove House Index Fails to Bounce into Spring

Between February and March, the Rightmove House Price Index revealed that house prices only rose by 0.4%, with the annual figure contracting by -0.8%.

This was the lowest monthly spring rise since 2011, with Rightmove blaming Brexit uncertainty for delaying ‘the usual spring bounce.’

Commenting on the data, Rightmove Director Miles Shipside said:

‘While March marks the start of spring, temperatures have yet to rise in the housing market. Buying activity remains cooler than usual, with hesitation as some buyers await a more settled political climate.

‘[…]This could be a temporary pause, and indeed market slowdowns at election time and around the original referendum result bounced back pretty quickly. Markets and people do not like uncertainty, though while sales agreed numbers are down by 7%, that means they are still running at 93% of last year’s levels.’

Pound Yen Outlook: Will the GBP/JPY Exchange Rate Rise on Dovish BOJ?

Looking ahead to Tuesday morning, the Pound (GBP) could slide against the Japanese Yen (JPY) following the release of the UK average earnings for January.

If average earnings including bonuses rise by 3.3% compared to the previous 3.4% rise, it could dampen sentiment in Sterling.

However, this could be offset by unemployment data, which is forecast to show unemployment within the UK is going to remain steady at 4%.

Early during the start of Wednesday’s Asian session the Bank of Japan’s (BoJ) Monetary Policy meeting minutes are due for release.

If the monetary policy minutes continue to reflect a dovish tone, the Pound Japanese Yen (GBP/JPY) exchange rate could rise.

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