The Pound Japanese Yen (GBP/JPY) exchange rate has been rangebound since markets opened this morning as investors await the latest interest rate decision from the Bank of England (BoE) later in the day.
At the time of writing the GBP/JPY pairing are trending around the 154.762 level as a relatively upbeat market mood limits the appeal of the Japanese Yen.
Sterling (GBP) Awaits BoE Interest Rate Decision
The Pound has been trading cautiously since markets opened as investors keep an eye on the latest BoE interest rate decision this afternoon.
Whilst the bank is expected to leave interest rates unchanged at 0.1%, the main driver of movement is thought to be the commentary from the bank.
If the BoE continue to take a more hawkish stance surrounding the current performance and expected recovery of the UK’s economy then Sterling could be bolstered against many of its major rivals.
Kallum Pickering senior economist at Berenberg commented on what we could expect from the bank:
‘We see a roughly even chance that the BoE could surprise markets today by signalling that it will end its planned asset purchases in August, instead of December as previously announced.’
‘While such a change would not have major economic consequences, it could take bond markets by surprise. Any commensurate jump in gilt yields could trigger a temporary correction in equity markets.’
Japanese Yen (JPY) Muted as Olympic Games to Reignite Japanese Economy?
The Japanese Yen remains muted against many of its major rivals as a relatively upbeat mood and lack of notable economic data limits JPY.
Whilst the Bank of Japan (BoJ) maintained its accommodative monetary policies of quantitative easing, negative policy rate, and 0% yield targeting at its latest policy meeting, all hopes lay on the 2020 Olympics to reignite the Japanese economy.
Economists at DBS Bank commented on what a rise in global inflation and the Olympics could bring for Japan, and the rest of the world:
‘A rise in global inflation should still be positive for Japan. The transmission mechanism is through higher external rates and widening spreads, hence weakening the yen and favouring Japan’s exports competitiveness. Japan equities have historically performed well in a weak yen environment.’
‘We believe the games, if held successfully, will bring back consumer confidence not only for Japan but globally, as a post-Covid era would be born.’
Pound Japanese Yen Exchange Rate Outlook: Coronavirus Developments in Focus
A quieter end of the economic week for both the Pound and Japanese Yen could see movement driven by any further coronavirus developments and the global market mood tomorrow.
The latest GfK consumer confidence survey from the UK could cause the Pound to stumble slightly if the figures meet forecasts.
Japanese Yen traders will be hoping for a risk-off market mood heading into the weekend to bolster the currency against its rivals.