Pound to Japanese Yen Exchange Rate Rises as Safe Havens Lose their Shine
Despite last week’s fresh Brexit uncertainties and the ever-present possibility of a No-deal Brexit, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has climbed since last Friday. This has been due to investors selling the safe haven Japanese Yen (JPY).
GBP/JPY opened last week at the level of 142.00 and fluctuated earlier in the week, briefly slumping to a three-week-low of 141.08 on Friday morning before seeing a strong rebound later in the day and closing the week at the level of 142.45.
Since markets opened on Monday, GBP/JPY has continued its advance. At the time of writing, GBP/JPY was trending almost half a Yen higher, near the level of 142.86.
Investors kept selling the safe haven Japanese Yen today, as US-China trade negotiations saw progress and hopes rose that a deal was in sight. The latest Japanese data has also not been particularly supportive.
Pound (GBP) Exchange Rate Strength Limited by Brexit Uncertainties
While the Pound advanced this morning, this was more due to weakness in its rivals than strength in Sterling.
The Pound has been losing its appeal in recent weeks, as the UK government fails to improve the appeal of its Brexit deal and fears of a worst-case scenario No-deal Brexit still being possible are weighing more heavily.
Last week, the government attempted to find a Parliament mandate for its Brexit negotiation position.
However, the deal was blocked due to a lack of support from hard Brexit supporting Conservative Party backbenchers, who were concerned that the government would rule out a No-deal Brexit.
Essentially, the government’s position in attempted renegotiations with the EU are weak as a result and investors don’t expect the negotiations to be particularly productive. This has kept the Pound under pressure.
Japanese Yen (JPY) Exchange Rates Sold amid US-China Trade Hopes
Monday’s GBP/JPY movement was due largely to weakness in the Japanese Yen.
Investors sold the safe haven Japanese Yen as the latest developments in US-China trade talks were perceived as largely optimistic.
With the US and China seeming closer and closer to reaching a deal on trade, global investors became more eager to take risks again.
This meant that safe haven currencies like the Japanese Yen lost their shine, but recent Japanese data has only kept further pressure on the Yen.
Japan’s capacity utilisation stats unexpectedly contracted in December according to Friday’s report, and December’s machinery orders stats only improved to 0.9% year-on-year rather than the expected 0.8%.
Pound to Japanese Yen (GBP/JPY) Exchange Rate Investors Await Political Developments
The primary cause of Pound to Japanese Yen exchange rate movement over the past week has been a lack of developments in Brexit, combined with perceived developments in US-China trade talks.
Essentially, political developments are driving GBP/JPY at the moment and this is likely to continue in the coming sessions as well.
Any potential developments in UK-EU Brexit negotiations could prove highly influential in helping Sterling to rise, though analysts do not expect these negotiations to be productive.
If there are no Brexit developments, the Pound could be in for losses instead as No-deal Brexit fears would intensify.
Japanese Yen investors will focus on US-China trade negotiations, which are set to continue this week. Signs that a trade deal is close will leave investors more eager to take risks and the safe haven Yen even less appealing.
Upcoming data could prove influential if it surprises too. Pound to Japanese Yen (GBP/JPY) exchange rate investors are also keeping an eye out for tomorrow’s UK job market report and Japan’s Wednesday trade balance results.