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Pound Japanese Yen Exchange Rate Steady, Japanese Household Spending Increases for Ninth Month Straight

GBP/JPY Exchange Rate Rangebound on Strong Japanese Consumption Figure

The Pound Japanese Yen (GBP/JPY) exchange rate held steady today, with the pairing currently trading around ¥131.789 following this morning’s release of August’s Japanese overall household spending figure, which rose for its ninth straight month by 1%.

Yoshiki Shinke, Chief Economist at Dai-ichi Life Research Institute, commented:

‘Consumption appeared to have been fairly strong in August after weak spending in July, when bad weather kept consumers at home. But the outlook isn’t bright. Wage growth is weak and the effect of October’s sales tax hike will begin to show. Consumer sentiment has been pretty gloomy, which means risks to the outlook are tilted to the downside.’

As a result, the Japanese Yen (JPY) benefited from relief in its export-dependent economy, despite rising weak global demand and an ongoing US-China trade war.

However, today also saw Japan’s labour cash earnings for August, which fell by -0.2% and pointed to further strains on consumers and leaving Japanese markets remaining cautious ahead of the Government’s forecast raising of sales tax in October.

GBP/JPY Exchange Rate Steady despite Brexit Deal Uncertainties

The Pound (GBP) held steady against many of its competitors this morning due to a relatively light data calendar until Thursday.

Brexit developments, meanwhile, continue to mute Sterling’s gains today following French President Emmanuel Macron’s ultimatum to Prime Minister Boris Johnson to fundamentally revise his new Brexit proposal by the ‘end of the week’. As a result, UK markets are becoming increasingly jittery on the heightened prospect of a UK-EU no-deal.

Paul Johnson, the Director of the Institute for Fiscal Studies (IFS), was also downbeat about the British economy in the event of a disorderly exit on October 31, saying:

‘The government is now adrift without any effective fiscal anchor. Given the extraordinary level of uncertainty and risks facing the economy and public finances, it should not be looking to offer further permanent overall tax giveaways in any forthcoming budget.

Any further indications of strained UK-EU negotiations over the newly proposed Brexit deal will likely weigh on the GBP/JPY exchange rate.

GBP/JPY Outlook: Could Sterling Rise on EU-UK Brexit Compromise?

Japanese Yen traders will be looking ahead to tomorrow’s release of September’s Japanese machine tool orders figure. Any signs of improvement could further buoy confidence in the Japanese economy and boost the JPY/GBP exchange rate.

Meanwhile, Sterling traders will be looking ahead to Thursday’s release of the UK’s manufacturing and industrial production figure for August. As these are expected to ease, we could see the Pound begin to fall against the Japanese currency.

Brexit developments will continue to drive the GBP/JPY exchange rate this week, and with any signs of a compromise emerging between the UK and the EU over the newly proposed Brexit deal, and we could see Sterling begin to rise as no-deal fears diminish.