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Calls for BoJ to Deepen Stimulus Buoys Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate

Pound Japanese Yen (GBP/JPY) Exchange Rate Rises as Japan’s Q2 GDP Disappoints

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of ¥132.2090.

The Japanese Yen remained under pressure on Monday as data revealed the country’s economy grew at a slower pace than originally anticipated.

The Japanese economy grew by an annualised 1.3% in the second quarter, down from the flash reading of 1.8% growth.

This has increased calls for the Bank of Japan (BoJ) to deepen stimulus in its upcoming meeting.

Looking ahead, Chief Economist at Totan Research, Izuru Kato noted:

‘There’s a possibility growth will turn negative in the October-December quarter.

‘If worries about such negative growth deepen, the Bank of Japan could consider lowering interest rates further into negative territory.’

Hopes UK Recession Can be Avoided Buoys Sterling (GBP)

Sparking hopes that a UK recession can be avoided, July’s GDP rose by a higher-than-forecast 0.3%.

The Pound rose against the Yen and Samuel Tombs, chief UK economist at Pantheon Macroecnomics said:

‘The pick-up in GDP in July is a reassuring sign that the economy is on course to grow at a solid-perhaps even above-trend rate in Q3, thereby substantially weakening the case for the MPC [Monetary Policy of the Bank of England] to cut Bank Rate before Britain’s Brexit path is known.’

However, looking at the wider picture, the UK economy has weakened over the course of 2019.

In the three months to July growth was left flat and head of GDP at the Office for National Statistics (ONS), Rob Kent-Smith noted:

‘GDP growth was flat and in the latest three months, with falls in construction and manufacturing.

‘While the largest part of the economy, services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.’

Pound (GBP) Rises Ahead of Parliament’s Second Early Election Vote

On Monday, the Pound rose as British Parliament prepared to vote on a motion for an early election on 15 October.

However, the government is expected to be defeated as opposition parties want the Hilary Benn bill to be implemented first.

Meanwhile, work and pensions secretary Amber Rudd resigned claiming the government was spending 80-90% of its time planning for a no-deal Brexit.

Speaking to BBC news she claimed there was ‘very little evidence’ a new deal would be reached.

Added to this, there have been reports that there is some uncertainty over whether the European Union will allow another extension.

France’s foreign minister, Jean-Yves Le Drian has stated his country would not be able to support a delay ‘in the current circumstances’.

Pound Japanese Yen Outlook: Brexit Chaos to Leave GBP Muted?

Looking ahead, the Japanese Yen (JPY) is likely to remain muted against Sterling (GBP) following the release of Japan’s machine tool orders data.

The Yen is likely to remain under pressure on Tuesday if August’s orders continues to fall.

Meanwhile, the Pound could remain flat following the release of UK average earnings data.

While earnings are expected to rise, it is likely Brexit pessimism is likely to leave the Pound Japanese Yen (GBP/JPY) exchange rate muted.