Pound Japanese Yen (GBP/JPY) Exchange Rate Sinks as Bank of Japan Holds its Interest Rates

December 19, 2019 - Written by John Cameron

STORY LINK Pound Japanese Yen (GBP/JPY) Exchange Rate Sinks as Bank of Japan Holds its Interest Rates

GBP/JPY Exchange Rate Sinks on Rising Hopes of US-China Trade Deal

The Pound Japanese Yen (GBP/JPY) exchange rate fell by -0.6% today, with the pairing currently trading around ¥142.342 despite the Bank of Japan (BoJ) holding its interest rates at -0.1% while downgrading its forecasts for industrial production.

The central bank was generally dovish in its statement:

‘Japan’s economy is likely to continue on a moderate expanding trend, as the impact of the slowdown in overseas economies on domestic demand is expected to be limited, although the economy is likely to continue to be affected by the slowdown for the time being.’

However, the Japanese Yen continues to benefit from rising hopes of a US-China trade deal being on the horizon, a prospect that could benefit the trade-reliant Japanese economy in the near-term.

In other Japanese economic news, JPY traders will be looking ahead to today’s release of the National CPI figure for November, which is expected to rise by 0.2%.

GBP/JPY Exchange Rate Falls, BoE Holds Interest Rates Amidst Brexit Uncertainty

The Pound (GBP) struggled against the Japanese Yen (JPY) after the Bank of England (BoE) held its interest rate decision at 0.75%, despite two policymakers pushing for a decrease to 0.5% due to Brexit uncertainty and a slowing global economy.

The bank was however optimistic about a recovering global economy, however, saying in its statement:

‘Global growth has shown tentative signs of stabilising and global financial conditions remain supportive.

‘The partial de-escalation of the US-China trade war provides some additional support to the outlook relative to the November Report, although trade tensions remain elevated.’

Nevertheless, growing fears of a cliff-edge no-deal Brexit next year are continuing to haunt British markets today, with the Parliamentary vote to go ahead on the newly amended Withdrawal Agreement Bill due to go ahead tomorrow.

Today also saw the GBP/JPY fall after November’s UK retail sales figures deteriorated to a 19-month low.

GBP/JPY Outlook: Could Sterling Sink on No-Deal Fears?

Sterling investors will be looking ahead to tomorrow’s release of December’s GfK consumer confidence figure, with any signs of improvement proving Pound-positive.

However, Brexit developments will remain in focus tomorrow, and with Boris Johnson’s new Withdrawal Agreement Bill expected to pass, we could see the GBP/JPY weaken on heightened no-deal fears.

Meanwhile, Japanese Yen traders will be keeping a close eye on US-China trade developments, with any signs of the world’s two largest economies securing a deal likely buoying the trade-reliant JPY.

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TAGS: Japanese Yen Forecasts Pound Yen Forecasts