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General Election Optimism Pushes Pound Japanese Yen (GBP/JPY) Exchange Rate to Six-Month High

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Jumps on Election Optimism

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate rallied with just a week to go until the UK general election. The pairing is currently trading at around ¥143.0040.

Sterling pushed higher on Thursday, buoyed by optimism the Conservative Party would secure a win in the general election.

Markets have priced in a Tory win to mean an end to over three years of Brexit uncertainty, which allowed the pairing to rise to the highest level since early May.

Sterling rallied against a handful of major currencies, and commenting on the recent rally, Lee Hardman of MUFG noted:

‘With only a week to go until the UK election, the Tory party still hold a sizeable lead of around 10 percentage points over Labour. It has made market participants increasingly confident to price in a Tory majority and an end to the deadlock in parliament.

‘With the pound increasingly pricing in a Tory election victory ahead of the event, there is some risk of ‘buy the rumour sell the fact’ price action following the announcement of the election result even if the Tories secure a majority as expected. Pound price action would be much more volatile if the opinion polls were to prove misleading.’

Japanese Yen (JPY) Falls as BoJ Sees No Need for Further Easing

On Thursday, the Bank of Japan’s (BoJ) Yutaka Harada said he believed the bank did not need to take extra steps to support government stimulus.

The board member reiterated Governor Haruhiko Kuroda’s comments, stating the bank preferred to save its limited ammunition.

Meanwhile, the government is expected to unveil a ¥26 trillion economic package in order to boost Japanese growth.

In a speech to business leaders in Oita, Harada noted:

‘Given that current low interest rates were caused by deflationary monetary policy in the past, the only way is to wait for prices and interest rates to rise while continuing current monetary easing aimed at sustaining economic growth.’

Uighur Legislation Causes US-China Tensions to Heat up

The Japanese Yen was left under pressure this week as tensions between the US and China over trade appeared to heat up.

Earlier this week, President Donald Trump suggested that a trade may need to wait until after the 2020 US election.

Added to this, US legislation over China’s mistreatment of its Uighur Muslim population has caused further tensions.

Reports suggested the legislation could complicate the highly-anticipated ‘phase one’ deal further.

Meanwhile, on Thursday Beijing’s commerce ministry said it is sticking to its stance on tariffs.

China believes tariffs would need to be rolled back in order for them to agree to a ‘phase one’ deal. Speaking to reporters, ministry spokesman, Gao Feng noted:

‘The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly.’

Pound Japanese Yen Outlook: Will Brexit Optimism Boost GBP Again?

Looking ahead, the Japanese Yen (JPY) could slump against the Pound (GBP) following the release of October’s household spending data.

If monthly spending plummets further than expected, Yen sentiment will slide.

Meanwhile, Sterling could be provided with a further boost if further reports suggest the Conservatives are likely to secure a majority in the general election.

A further boost to Brexit optimism will cause the Pound Japanese Yen (GBP/JPY) exchange rate to rally once again.