The Pound Japanese Yen (GBP/JPY) exchange rate had edged lower since markets opened this morning after figures confirmed the UK’s economy contracted during the first quarter of 2021.
The GBP/JPY pairing are currently trending around the 152.861 level as the Japanese Yen finds support from a souring market mood.
Pound (GBP) Weakens as UK Economic Contraction Confirmed
The Pound has weakened against many of its major rivals since markets opened this morning after the Office for National Statistics (ONS) confirmed the UK’s economy contracted during Q1.
GDP contracted by 1.6% in the first quarter, compared with the previous estimate of 1.5%, though disappointing the contraction was far less than the 20% seen in the spring of 2020 during the first UK lockdown.
Jonathan Athow, deputy national statistician at the ONS, commented on the latest figures saying:
‘Today’s updated GDP figures show the same picture as our earlier estimate, with schools, hospitality and retail all hit by the reimposition of the lockdown in January and February, with some recovery in March.’
‘With many services unavailable, households again saved at record levels with only last spring seeing more saved.’
Japanese Yen (JPY) Supported by Risk-Off Trade
The Japanese Yen has found itself supported this morning as a souring market mood drives demand towards the safe-haven Yen.
However, limiting any major gains for the Japanese Yen today as industrial output in Japan dropped further than expected as global chip shortages cause backlogs.
Industrial output slumped -5.9% in May, the biggest monthly drop in a year, as a decline in car manufacturing looked to be the main cause behind the drop.
Yuki Masujima, Bloomberg economist, commented on the fall in factory output saying:
‘The deeper-than-expected drop in Japan’s May industrial production reflected a hit from the extended state of emergency to contain the virus. Weaker domestic demand overwhelmed support from exports, which have remained strong.’
Pound Japanese Yen Exchange Rate Outlook: Manufacturing PMI in Focus
For both Pound and Japanese Yen investors, tomorrow’s manufacturing PMI’s from the UK and Japan could drive movement in the pairing.
The UK’s manufacturing PMI is expected to show a sustained growth in the sector which could provide Sterling with some much needed support.
The Japanese manufacturing PMI is thought to have softened slightly, though today’s industrial output figures could cause the sector to re-enter contraction territory.
The GBP/JPY exchange rate will continue to be driven by any further movement in the global market mood in the coming days.