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Pound to Japanese Yen (GBP/JPY) Exchange Rate Dips as Safe-Haven Demand Rises on US Political Uncertainty

November 2, 2020 - Written by John Cameron

GBP/JPY Exchange Rate Sinks as Japanese Yen Benefits from Safe-Haven Demand

The Pound to Japanese Yen (GBP/JPY) exchange rate dipped today, with the pairing currently fluctuating around ¥135.329.

The Japanese Yen (JPY) rose against Sterling today owing to its safe-haven status.

With uncertainties over the global economy and US presidential elections, the safe-haven JPY benefited from the risk-off market mood.

In Japanese economic news, today saw the release of the Jibun Bank manufacturing PMI for October, which remained in contraction territory at 48.7.

Usamah Bhatti, an economist at IHS Markit, commented on the data:

‘October PMI data pointed to a further easing in the downturn across the Japanese manufacturing sector, as firms reported slower falls in output and new orders. Japanese manufacturers will be particularly buoyed by the return to growth in export orders, as demand across key overseas markets such as China picked up.’

However, with export orders expected to increase in the months ahead – with China’s economy showing a return to growth last month – JPY investors are remaining cautiously optimistic.

Pound (GBP) Falls as UK Lockdown Threatens Economic Recovery

Sterling is subdued today following Prime Minister Boris Johnson’s announcement over the weekend that the UK would be entering a second national lockdown this Thursday.

As a result, GBP investors are now more concerned than before about the British economy, which could face a ‘double-dip’ recession in the fourth quarter.

UK economic news has also failed to buoy the GBP/JPY exchange rate today, with the latest manufacturing PMI for October rising to 53.7.

Although this was stronger than expected, Pound investors have remained cautious as the outlook for the nation’s economy still remains largely uncertain.

Rob Dobson, the Director at IHS Markit, explains:

‘The outlook for the remainder of the year has therefore become increasingly uncertain, with risks tilted to the downside. While most companies maintain a positive outlook, with three-fifths of manufacturers expecting output to rise over the coming year, concerns about near-term risks posed by the pandemic, changes to COVID restrictions and related stimulus measures, plus Brexit anxieties, continue to fog the future.’

Brexit news has been thin on the ground this week, sparking concerns that UK-EU trade talks could still be in a deadlock.

Consequently, demand for Sterling has remained low as the British economy faces several uncertainties as the year unravels.

GBP/JPY Outlook: Sterling to Fall as UK Enters Second Lockdown

Japanese Yen (JPY) investors will be awaiting tomorrow’s release of the Bank of Japan’s (BoJ) monetary policy meeting minutes.

Any dovishness from Japan’s central bank could drag down the JPY/GBP exchange rate.

Pound (GBP) investors will be monitoring Brexit news this week, with talks between the UK and the EU still uncertain.

If UK-EU talks show sometimes of progress towards a post-Brexit trade deal, then we could see Sterling head higher.

The GBP/JPY exchange rate will, however, remain volatile this week as the UK heads into its second national lockdown on Thursday.

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