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GBP to JPY Exchange Rate Unappealing as Brexit Jitters Cause Safe Haven Demand

April 8, 2019 - Written by John Cameron

Numerous factors, such as brief soft Brexit hopes, a stronger US Dollar (USD) and some underwhelming Japanese data, made it easier for the British Pound to Japanese Yen (GBP/JPY) exchange rate to advance last week. This week so far though, safe haven demand has kept pressure on the pair despite continued weakness in Japanese data.

Last week’s Japanese Yen weakness meant that GBP/JPY was able to close the week over a Yen higher, as the pair advanced from 144.59 to 145.66 throughout the week. In the middle of the week though, soft Brexit hopes briefly led to a surge in Pound demand and the pair touched on a weekly high of 147.06.

Amid a lack of certainty over how Brexit will unfold this week though, GBP/JPY is currently struggling to gain much ground and continues to trend just below this week’s opening levels, near the level of 145.42.

Against other major currencies, the Pound saw slightly more resilient movement on hopes that Brexit will become softer or that the process will be delayed. GBP/JPY gains are being limited by Japanese Yen resilience.

GBP Exchange Rates Limp as Investors Await Major Week for Brexit

Uncertainties over how the Brexit process will unfold this week have been driving Pound movement recently. With the UK still set to formally leave the EU this Friday – the 12th of April – fears of a possible no-deal Brexit have returned.

For much of last week, investors became a little more hopeful that a softer Brexit could be possible, as UK Prime Minister Theresa May began cross-party talks with opposition Labour Party Leader Jeremy Corbyn.

If the two leaders are able to reach any compromise on Brexit, analysts predict it could lead to a softer outcome for the process. A soft Brexit would be more Pound positive.

Pound investors had also been hopeful that the EU would offer Britain a longer Brexit extension, which analysts believe could also help make the Brexit process softer.

However, the Pound weakened towards the end of the week as there is still no resolution over Brexit or another delay, despite the formal Brexit date being under a week away.

The Pound’s strength remained limited when markets opened this week, as Brexit uncertainties dominated the outlook.

This prevented the Pound from sustaining any gains versus the safe haven Japanese Yen this morning.

JPY Exchange Rates Benefit from Safe Haven Demand and Weakness in Rivals

The Japanese Yen was relatively unappealing last week, and ended up falling versus the Pound despite the Brexit uncertainties weighing on Sterling towards the end of the week.

This was because while the Japanese Yen is a safe haven currency that benefits from times of market uncertainty, its rival the US Dollar (USD) saw a surge in demand and this kept pressure on Yen movement.

On top of this, Japanese Yen movement was further weighed throughout the past week by some underwhelming Japanese data.

Japanese manufacturing index data fell short of expectations and Nikkei’s manufacturing PMI contracted as expected. Japanese household spending was also much lower than expected.

However, these factors lightened slightly on Monday morning. Safe haven demand amid Brexit uncertainties and some strong US data at the end of last week helped the Japanese Yen to firm slightly.

This was despite this morning’s Japanese consumer confidence figures falling short of analyst expectations.

GBP/JPY Exchange Rate Forecast: Brexit Takes Focus in Quiet Week for Data

Both the Brexit-correlated Pound and the risk-correlated Japanese Yen are likely to be influenced by this week’s major Brexit developments.

The current Brexit date is mere days away, meaning investors are highly anticipating some kind of major news on a delay to Brexit, or a way for the Brexit process to pass into UK law.

Unless there are any surprising Brexit developments over the next couple of days, investors are currently looking ahead towards Wednesday’s session – which could be the most influential of the week.

Wednesday’s Asian session will see the publication of this week’s most notable Japanese data, including Japanese machinery orders, PPI, and a speech from Bank of Japan (BoJ) Governor Haruhiko Kuroda.

The EU will also hold a summit on Wednesday, which analysts perceive as being one of the best chances for the UK to secure a delay to the Brexit process.

If the UK and EU cannot come to an agreement on delaying Brexit, the Pound would plummet and investors would rush to buy safe haven currencies amid market chaos.

However, the Pound to Japanese Yen exchange rate would climb instead if Japanese data disappoints and there are any relieving or optimistic Brexit developments.
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