GBP/JPY Exchange Rate Rises as Japanese Manufacturing Activity Falls on Global Trade Tensions
The Pound Japanese Yen (GBP/JPY) exchange rate edged higher today, leaving the pairing fluctuating around ¥128.126 following this morning’s publication of the year-on-year Japanese industrial production figure for June, which fell by -3.8%.
Following this report, Japanese Yen traders have become increasingly jittery as this reconfirms that global trade tensions are continuing to weigh on Japanese manufacturing activity.
Heightening global recession fears are also putting pressure on JPY on concerns surrounding US-China trade relations.
Oliver Pursche, the Chief Market Strategist at Bruderman, commented:
‘What’s happening in Hong Kong, what’s happening with Brexit and the trade war, it’s all a mess. Every central bank around the world is trying to prop up economies and every politician around the world is trying to destroy economies.’
The Bank of Japan (BoJ) is also increasingly expected to ease its interest rates as the central bank is becoming more committed to stimulus measures in case the global slowdown derails the Japanese economy.
Hiroshi Ugai, a Chief Economist at JPMorgan Securities Japan, said:
‘The BOJ shifted to a pre-emptive easing stance. The BOJ is now willing to ease in response to risks of weakening momentum, rather than waiting for hard evidence indicating a loss of inflation momentum.’
GBP/JPY Exchange Rate Improves as UK Retail Sales Jump Unexpectedly in July
The Pound (GBP) rose following today’s publication of the monthly UK retail sales figures for July, which unexpectedly rose by 0.2%, despite their -0.2% consensus.
Year-on-year retail figure also exceeded forecasts, rising by 2.9%.
Samuel Tombs, the Chief UK Economist at Pantheon Macroeconomics, said:
‘July’s retail sales figures continue the trend of above-consensus numbers which demonstrate that consumers aren’t fazed by the Brexit deadline.’
Brexit news has remained in focus, with Labour leader Jeremy Corbyn urging for opposition leaders and Tory rebels to come together in a caretaker government to prevent Prime Minister Boris Johnson going ahead with a possible no-deal exit from the EU on October 31.
Rebel Conservative MPs Dominic Grieve and Caroline Spelmen among others have agreed to discussions with Mr Corbyn, however Liberal Democrat Leader Jo Swinson rejected a caretaker government as ‘nonsense’.
GBP/JPY Outlook: Japanese Foreign Investment figure in Focus
Japanese Yen traders will be looking ahead to tomorrow’s publication of the Japanese Foreign Investment figure for August.
Any signs of improvement could bolster the Japanese Yen, as this could ease fears of a rate cut from the BoJ.
The Pound Japanese Yen exchange rate will remain sensitive to Brexit developments for the rest of this week, with any further breakdowns in UK-EU talks over the Irish backstop likely to prove Sterling-negative.