May 1, 2020 - Written by John Cameron
STORY LINK Pound Japanese Yen (GBP/JPY) Exchange Rate Falls as UK Manufacturing PMI Hits Historic Low in April
GBP/JPY Exchange Rate Falls as UK Manufacturing Suffers From Covid-19 Crisis
The Pound to Japanese Yen (GBP/JPY) exchange rate fell by -0.8% today, with the pairing currently trading around ¥133.874.
Sterling struggled today after it was revealed that UK consumer credit growth and mortgage approvals had fallen to their lowest since 2013.
Mortgage approvals for house purchases fell to just 56,200, while net flows of consumer credit fell to the annual rate of 3.7% in March, its lowest since June 2013.
Today also saw April final UK Markit Manufacturing PMI confirm fears of a downturn in the UK’s industrial sector. The figure slumped to a worse-than-expected 32.9 confirming a record low.
Rob Dobson, the Director at IHS Markit, commented:
‘UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey’s 28-year history.’
‘Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to COVID-19. The only pockets of growth were seen at firms making medical and food products.’
As a result, Pound (GBP) investors have become increasingly anxious over the UK’s economic health going forward.
Japanese Yen (JPY) Rises on Surging Safe-Haven Demand
The Japanese Yen (JPY) has remained resilient today despite fears that Japan’s GDP could be set to shrink by -22% in the second quarter.
Japan’s NIKKEI said in its statement:
‘Japan's economy is expected to contract by an annualized 21.7% during the April-June quarter, it's worst showing since the end of World War II, as the coronavirus crisis sends business and consumer activity into an unprecedented stall, a Nikkei survey shows.’
Meanwhile, JPY is benefiting from its safe-haven status as the US Dollar plummeted on a slew of negative American economic data. As a result, the Japanese Yen has become a favoured haven for investors as the coronavirus continues to ravage the global economy.
In Japanese economic news, today saw the release of the Jibun Bank Manufacturing PMI for April, which fell deeper into contraction territory at 41.9.
Joe Hayes, an Economist at IHS Markit, commented:
‘The outlook for goods producers in Japan will be strongly linked to the global recovery, when that eventually happens. However, the latest figures show that until we're past the peak of the COVID-19 pandemic and export demand can begin its slow recovery, a sizeable chunk of Japan's manufacturing economy is set to remain effectively shut down.’
GBP/JPY Forecast: Could Easing UK Lockdown Restrictions Boost Sterling?
Japanese Yen (JPY) investors will be looking ahead to Wednesday’s release of the Bank of Japan’s (BoJ) Monetary Policy Meeting Minuets. However, if the bank is notably downbeat in its assessment of the Japanese economy going ahead, then we could see JPY shed some of its gains.
The GBP/JPY exchange rate could edge higher next week if Downing Street outlines its coronavirus lockdown easing plans. Any further hopes that Britain’s economy could recover sooner rather than later would prove Pound-positive.
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TAGS: Japanese Yen Forecasts Pound Sterling Forecasts