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Pound Japanese Yen (GBP/JPY) Exchange Rate Sinks as No-Deal Brexit is now ‘Assumed’ by UK Government

GBP/JPY Exchange Rate Falls as No-Deal Brexit Fears Weigh on Sterling

The Pound Japanese Yen (GBP/JPY) exchange rate fell by -0.4% today, leaving the pairing fluctuating around ¥133.897.

The Pound (GBP) fell against the Japanese (JPY) following comments from the former Environment Secretary, Michael Gove, who said that the UK Government is now working on the ‘assumption’ of a no-deal Brexit.

Mr Gove said:

‘The EU’s leaders have, so far, said they will not change their approach – it’s the unreformed withdrawal agreement, take it or leave it. We still hope they will change their minds, but we must operate on the assumption that they will not.’

These follow comments from Brussels last week which sowed a refused to re-open the withdrawal agreement, due to Prime Minister Boris Johnson’s insistence of the removal of the Northern Irish backstop – a condition that the EU continues to reject.

Sterling failed to benefit from the publication of the UK mortgage approvals figures in June, which rose from 65.647k to 66.440k – its highest since January.

Craig Hall, the Head of Broker Relationships at L&G Mortgage Club, said:

‘The annual growth rate for mortgage lending remains stable around 3% – where it’s been since late 2016. Despite wider uncertainty, this stability is an indicator that the mortgage market is in good health.’

JPY/GBP Exchange Rate Rises as Japanese Retail Figures Improve in June

The Japanese Yen (JPY) rose following the printing of the year-on-year retail trade figures for June, which beat forecasts at 0.5%. However these eased against last year’s 1.3%.

Japanese large retailers’ sales for June also came in better-than-expected, avoiding a -0.7% decrease and holding steady at -0.5%.

As JPY traders are looking ahead to the Bank of Japan’s (BoJ) interest rate decision tomorrow, which is expected to hold at -0.1%, improving economic conditions have buoyed hopes a more tempered outlook from the central bank.

The BoJ is expected to make some minor adjustments to forward guidance by committing to keeping rates low for an extended period.

However, Takeshi Minami, a Chief Economist at Norinchukin Research Institute, was sceptical, saying:

‘Adjusting the guidance is an important option. But it means the BOJ is doing nothing (to underpin the economy).’

GBP/JPY Outlook: Dovish BoJ Could See JPY Begin to Fall Against the Pound

Japanese Yen (JPY) traders will be looking ahead to tomorrow’s printing of the Japanese unemployment rate figures for June, which are expected to hold at 2.4%.

Tomorrow will also see the flash year-on-year Japanese industrial production figures for June.

However, the JPY/GBP exchange rate could begin to sink tomorrow if the BoJ becomes gloomier in its forecasts.

The GBP/JPY exchange rate, meanwhile, will be fixated on developments surrounding Brexit.

Any further signs of tensions between the UK and the EU could weigh on the Pound, as a disorderly exit in October is now appearing more likely.