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Pound Japanese Yen (GBP/JPY) Exchange Rate Plummets from Post-Referendum Highs

GBP/JPY Exchange Rate Falls as Markets Await Conservative’s Next Moves on Brexit

The Pound Japanese Yen (GBP/JPY) exchange rate plummeted by -1.2% today, with the pairing currently trading around ¥145.649 as Sterling begins to shed some of its post-referendum highs following the landslide victory for the Conservative Party last night.

Guy Foster, Head of Research at Brewin Dolphin, was cautious, however, saying: 

‘[T]he potential for a smooth Brexit removes some of the downside risk for the UK economy.’

‘[However, this is still], after all, just the beginning of the exit process. Even with the passing of the withdrawal agreement, the UK could still leave the EU without a deal at the end of 2020 if trade negotiations don’t proceed successfully.’

Markets reacted positively to the Conservative victory last night, seeing it as an opportunity for parliament to push forward with Brexit without any further hindrances from inter-party divisions.

Brexit has hung like a shadow over UK business and has considerably weakened its economy, so a Tory majority has provided renewed optimism in the Pound as the political deadlock now promises to be broken.

However, the GBP/JPY exchange rate is likely to remain subdued into the weekend as markets await Prime Minister Boris Johnson’s next moves on Brexit.

JPY/GBP Exchange Rate Rises despite Sinking Japanese Industrial Production

The Japanese Yen (JPY) soared against the sinking Pound (GBP) today despite today’s release of the Japanese Industrial Production figure for October, which fell below expectations from -7.4% to -7.7%.

Today also saw the Japanese Ministry of Economy’s Capacity Utilization figure for October fall from 1% to -4.5%, further drawing up concerns for Japan’s economic health into 2020.

Meanwhile, US-China trade developments have remained in focus for the Japanese Yen (JPY) trader today, following promises from US President Donald Trump that a trade deal between the two superpowers was now ‘very close’.

Mr Trump tweeted:

‘They [China] have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election.’

News of a US-China trade deal has provided some upward momentum for the JPY/GBP exchange rate today, with Japanese Yen traders now more optimistic that this could have a positive effect on the Japanese economy in the near-term.

GBP/JPY Outlook: Could Sterling Rise on a Tory Brexit Breakthrough?

Pound (GBP) investors will be awaiting Monday’s release of the flash Markit Services PMI figure, with any signs of improvement in Britain’s largest sector providing a boost for Sterling.

Monday will also see the publication of the UK Markit Manufacturing PMI for December.

Japanese Yen (JPY) traders, meanwhile, will be looking ahead to Monday’s Japanese Jibun Bank Manufacturing PMI for December, which is expected to remain in contraction territory at 48.4.

Britain’s political developments will continue to drive the GBP/JPY exchange rate next week, with markets bracing for the Conservative’s next moves regarding Brexit.