July 13, 2020 - Written by John Cameron
STORY LINK GBP to JPY Exchange Rate Climbs as Coronavirus Vaccine Speculation Hits Safe Havens Lower
The British Pound to Japanese Yen (GBP/JPY) exchange rate is climbing today, continuing the advances the pair has seen for around half a month now. While the pair’s gains are narrower than gains seen in recent weeks, this is due to the Pound falling back against other major currencies. Overall, the Japanese Yen’s broad weakness in reaction to global coronavirus developments was the primary cause for the pair’s gains this week.
Last week was GBP/JPY’s third consecutive weekly gain. The pair opened the week at the level of 234.22, and trended higher for most of the week. After touching on a high of 135.83 towards the end of the week though, GBP/JPY slipped lower again. This was the best level for GBP/JPY in half a month, since mid-June.
GBP/JPY ultimately ended last week at the level of 134.92. Since opening this week, GBP/JPY has been edging higher again but has struggled to reach back to the highs seen last week.
At the time of writing, GBP/JPY is trending near the level of 135.37.
GBP Exchange Rates Benefit from Hopes of UK Economic Activity
Against many major currencies, the Pound slipped lower today. The British currency had seen jumps in demand over the past couple weeks as it was bought from its cheapest levels and supported by speculation of Brexit developments.
Last week also saw Sterling benefit from UK Chancellor Rishi Sunak’s latest fiscal stimulus plans.
However, this week’s Pound movement has been weaker so far. Some investors have been selling the British currency again following last week’s gains, due partially to lasting Brexit uncertainties weighing over Sterling’s outlook.
However, the British currency is gaining against the Japanese Yen today.
While this is largely due to the Japanese Yen’s losses, the Pound is benefitting slightly from hopes that Britain’s economy will rebound as it reopens from the coronavirus pandemic.
According to new comments made today by Bank of England (BoE) Governor Andrew Bailey:
‘We are seeing the economy come back now somewhat, because obviously the restrictions are beginning to be lifted.
But there’s a long way to go, we are very worried about jobs, as are a lot of people.’
Of course Bailey’s comments also highlighted concerns about Britain’s job market. This is highlighting UK jobs ahead of the job market report expected later in the week.
JPY Exchange Rates Tumble as Investors Remain Willing to Take Risks
The Japanese Yen is a currency that typically benefits strongly from market demand for safe havens. In fact, the Yen’s safe haven correlation is often even stronger than its correlation to Japanese data.
The Yen had been attempting to gain last week on brief rises in safe haven demand.
As signs of a ‘second wave’ of coronavirus cases worsened and cases surged in major locations in the US and Australia, investors became more eager to buy safe havens like the Japanese Yen.
However, safe haven demand has remained limited. This is despite cases continuing to worsen significantly in the US.
Despite worsening cases and lingering growth fears, the safe haven Japanese Yen weakened today and GBP/JPY advanced. This is largely due to market hopes over a vaccine to the coronavirus.
Speculation has risen since the end of last week that a vaccine for the virus could be approved as soon as the end of the year. While this is far from certain, some potential for a drug being tested by BioNTech and Pfizer is boosting market appetite for risks today.
GBP/JPY Exchange Rate Forecast: Risk-Sentiment Shifts Remain the Focus
Some key UK and Japanese events are set for this week’s economic calendar.
Tomorrow will see the publication of key UK data including trade balance, production and growth results. If May’s growth figures beat expectations they could boost the Pound’s appeal.
Japanese industrial production data will also be published.
However, Japanese Yen investors are more likely to await Wednesday’s Bank of Japan (BoJ)
In fact, Japanese data may not influence the Japanese Yen much overall due to the market’s broad focus on risk-sentiment and the coronavirus. As a result, coronavirus developments may remain the bigger focus for GBP/JPY overall.
If coronavirus hopes are dampened again, safe haven demand could rise and the Pound to Japanese Yen exchange rate could shed some of its recent gains.
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