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Pound Sterling to Japanese Yen Exchange Rate Investors Hopeful for Brexit ‘Flextension’

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Pound to Japanese Yen Exchange Rate Avoids Major Brexit Losses amid Mixed Japanese Data

Despite uncertainty over how Brexit will unfold, with just a week until the formal Brexit date is set to take place, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been able to hold most of this week’s fairly solid gains.

Since opening this week at the level of 144.59, GBP/JPY has been climbing due to a combination of Brexit hopes and a weaker Japanese Yen (JPY).

GBP/JPY touched a weekly high of 147.06 on Wednesday, and while the pair has since slipped from those highs it still trends relatively solidly on Brexit hopes.

At the time of writing on Friday, GBP/JPY was trending close to the level of 146.20 – over a Yen above the week’s opening levels.

Investors have been hesitant to buy the Japanese Yen due to weaker safe haven demand and mixed Japanese data, and next week’s upcoming Japanese data is unlikely to change that much.

Pound (GBP) Exchange Rates Benefit from Hopes of Brexit ‘Flextension’

The Pound (GBP) saw mixed movement in the past week, as investors bought the British currency on hopes that the UK could be headed towards a softer Brexit, but also briefly sold it on concerns that a no-deal Brexit was still possible.

Britain is currently set to leave the EU next Friday – the 12th of April. No deal has been agreed, so unless one is agreed in the next week or the UK and EU agree to an extension, a no-deal Brexit is still possible.

However, amid efforts from both the UK and EU to avoid a no-deal Brexit, the Pound has avoided major losses. Hopes for no-deal Brexit to be avoided have been among the primary causes of Pound strength in recent sessions.

The Pound found a little extra support at the end of the week, as reports emerged suggesting that European Council President Donald Tusk was pushing for the EU to agree a longer and event flexible delay to the process.

In what is being called a ‘flextension’, Tusk reportedly said overnight:

‘The only reasonable way out would be a long but flexible extension,

I would call it a ‘flextension’. How would it work in practice? We could give the UK a year-long extension, automatically terminated once the withdrawal agreement has been accepted and ratified by the House of Commons.’

Japanese Yen (JPY) Exchange Rates Slide on Risk-Sentiment and Mixed Data

Following strong performance towards the end of March, the safe haven Japanese Yen weakened this week as investors became more willing to take risks again, and Japan’s latest data did little to improve the currency’s outlook.

News that US-China trade negotiations were nearing some kind of resolution, combined with lightening Reserve Bank of Australia (RBA) interest rate cut bets and recovering global bond yields, made investors more willing to take risks in recent sessions.

As a result of higher risk-sentiment, investors sold the Japanese Yen from its recent highs.

The Yen’s tumble didn’t see much resistance either, as the latest Japanese data continued to paint a relatively gloomy picture for Japan’s economy.

Nikkei’s Japanese services PMI from March fell short of expectations on Wednesday, and this morning’s data revealed that Japanese household spending was much lower than expected in February.

Pound to Japanese Yen (GBP/JPY) Exchange Rate Focus on Brexit and Risk-Sentiment

Next week is likely to be yet another major one for the Brexit process and the Pound, as investors anticipate news on a potential Brexit delay that could significantly influence the Pound outlook.

As the coming week’s Japanese data is unlikely to be particularly influential for the Japanese Yen outlook, GBP/JPY exchange rate movement is likely to be driven by Brexit news and other political developments instead.

If the UK and EU are able to agree to a further extension of the Brexit process by the end of next week, it will offer the Pound some relief – though investors are already expecting that a no-deal Brexit will be avoided.

The Pound would see even stronger gains if UK Parliament is able to agree to some kind of softer Brexit.

The Japanese Yen, on the other hand, could be influenced by Monday’s Japanese consumer confidence data, but potential developments in US-China trade negotiations or other risk-correlated events are more likely to influence the Pound to Japanese Yen (GBP/JPY) exchange rate.