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GBP to JPY Exchange Rate Climbs amid Profit Taking and Risk Sentiment

June 6, 2019 - Written by Ben Hughes

Despite this week’s lack of particularly strong UK news or support for the Pound, the British Pound to Japanese Yen (GBP/JPY) exchange rate has been able to register gains throughout the week so far. This has been largely due to investors buying the Pound from its lows and selling the Japanese Yen from its recent highs however.

After opening this week at the level of 136.77, GBP/JPY has trended with an upside bias despite the lack of support for Sterling. GBP/JPY has gained almost a Yen overall throughout the week already, and at the time of writing on Thursday afternoon was trending closer to the level of 137.61.

Still, the pair remains well below the levels seen throughout last month, remaining generally quite close to multi-month lows.

GBP Exchange Rates Edge Away from Lows in Profit Taking

The Pound has been relatively range-bound this week so far, as the selloff of the currency that lasted throughout May cools off.

Some investors have opted to buy the British currency back from its cheapest levels in profit taking, but generally investors are hesitant to move too much on the Pound with Britain’s leadership contest ongoing.

UK Prime Minister Theresa May will soon step down, and there are concerns that her successor could be more willing to back a worst case scenario no-deal Brexit.

With no-deal Brexit fears returning, the Pound’s potential for gains is highly limited.

Still, some analysts are a bit more optimistic about the Pound outlook and forecast that a no-deal Brexit will be avoided. According to strategists from Morgan Stanley:

‘We still see an orderly Brexit resolution in 1H20 as more likely, hence we remain bullish on sterling in the medium term,’

These more optimistic forecasts are offering the Pound support and helping it to avoid losses, even sustain some gains, against rivals like the Japanese Yen.

JPY Exchange Rates Sold from Best Levels

The Japanese Yen was one of the more appealing major currencies throughout May.

As Federal Reserve interest rate cut bets rose and the US ramped up protectionist trade rhetoric against more trade partners, investors seeking safe havens skipped over the US Dollar in favour of the Japanese Yen.

The Japanese Yen is a reliable safe haven currency and US Dollar rival, so the recent US Dollar weakness and market trade uncertainty has left it appealing overall.

Investors are selling the Japanese currency from its best levels in profit-taking this week, but it remains relatively high compared to levels seen earlier in the year.

This week’s Japanese data has been mixed and has not been enough to help the Japanese Yen to hold its best levels.

While manufacturing PMI data at the beginning of the week beat forecasts, it still printed a contraction. Japan’s latest services PMI unexpectedly fell to 51.7 rather than rising to 51.9 as expected.

GBP/JPY Exchange Rate Forecast: Japanese Data and Kuroda Speeches Ahead

The Pound to Japanese Yen exchange rate is on track to sustain gains this week, and Friday’s news is unlikely to have a significant impact on the Yen’s movement either.

Japanese data including cash earnings, household spending and April’s coincident index will be published during Friday’s Asian session.

Upcoming speeches from Bank of Japan (BoJ) Governor Haruhiko Kuroda on Friday and Saturday have more potential to influence the Yen if they surprise investors.

However, the Yen is most likely to be driven by global trade developments and the strength of the Yen’s rival, the US Dollar.

As for Sterling investors, the Pound to Japanese Yen exchange rate could also be influenced by any late-week developments in Brexit or the UK leadership contest.
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