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Pound Japanese Yen (GBP/JPY) Exchange Rate Sinks despite Japanese Manufacturing Sinking to a 6-Year Low

October 1, 2019 - Written by John Cameron

GBP/JPY Exchange Rate Falls, Could the Japanese Yen Fall on US-China Trade Flare-Up?

The Pound Japanese Yen (GBP/JPY) exchange rate eased by -0.5% today, with the pairing currently trading around ¥132.016 despite the Japanese manufacturing index falling to a six-year low in the third quarter, with the figure sinking from 7 to 5.

Joe Hayes, Economist at IHS Markit, was downbeat in his assessment:

‘Japan continues to suffer from the trade-led global growth slowdown. While new product launches, particularly in the tech and capital goods space, provide some mild reason for optimism, concern of trade frictions being drawn out further are underpinning a cautious approach.’

As a result, the Japanese Yen’s gains have been slightly clipped, but this failed to lower the JPY/GBP exchange rate due to a volatile Pound.

However, JPY could begin to lose its gains if US-China trade tensions flare-up, as this would further damage market confidence in the global economy and place further downward pressure on the trade-reliant Japanese economy.

GBP/JPY Exchange Rate Sinks, UK Manufacturing Remains Mired in Contraction Territory

The Pound (GBP) fell following today’s publication of September’s Markit Manufacturing PMI, which remain mired in contraction territory at 48.3.

Rob Dobson, Director at IHS Markit, was downbeat, saying:

‘The shroud of uncertainty also weighed on manufacturers' confidence, which remained at one of its lowest ebbs in the survey history. These headwinds all ensure that manufacturing will likely remain a drag on UK economic growth during the months ahead.’

Sterling also fell following comments from Doug Bannister, Chief Executive of Port of Dover, who said that a no-deal Brexit could cost up to £1 billion of UK trade every week.

Mr Bannister added:

‘That’s how critical it is. If there’s a no-deal Brexit, it’s not going to be OK. But people are doing all they can to ensure Britain keeps trading.’

Following on from Ireland’s rejection of a leaked backstop plan, UK markets have remained jittery on rising fears of a no-deal Brexit.

GBP/JPY Outlook: Brexit and Global Economic Developments to Remain in Focus

Pound traders will be looking ahead to tomorrow’s release of the UK’s Markit Construction PMI for September, which is expected to hold steady at 45.

Tomorrow will also see August’s UK’s BRC shop price index. Any signs of improvement could provide some uplift for the GBP/JPY exchange rate.

Japanese Yen investors, meanwhile, will be looking forward to tomorrow’s release of August’s consumer confidence index, which is expected to ease from 37.1 to 36.9.

The GBP/JPY exchange rate will remain dictated by Brexit developments, however, with the Conservative Government expected to forward a workable UK-EU withdrawal deal ahead of the October deadline.

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