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Pound Japanese Yen (GBP/JPY) Exchange Rate Slides as Markets Turn to Safe-Haven Currencies

Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Falls as Markets Focus on Coronavirus

The Pound Sterling Japanese Yen (GBP/JPY) exchange rate edged lower, leaving the pairing trading at around ¥143.7290.

The safe-haven Japanese Yen edged higher against Sterling as markets focused on the spread of the coronavirus in China.

With the death toll currently at 17, and the number of reported infections at 600, China has locked down Wuhan where the outbreak is believed to have originated.

Wednesday saw markets rebound after the scare at the start of the week, but the spread of infection weighed on sentiment once again.

Commenting on this, Pepperstone’s Head of Research, Chris Weston said:

‘Yesterday we thought it was one sell-off and done […] today it’s a bit of a slap back to reality.’

The World Health Organization (WHO) are expected to decide later today whether or not the situation is a global health emergency.

In a commentary, IG’s Jingyi Pan stated:

‘As far as the market is concerned, the current reaction remains mild and perhaps rightly so given the difficulty to estimate the impact of an evolving syndrome.’

Japanese Yen (JPY) Rises as Exports to China Increase

The Yen edged higher despite data revealing that Japan’s trade balance was negative in 2019, with exports falling for the 13th month in a row in December.

This was the second consecutive year the country has reported a negative trade balance as trade tensions between US and China, and a row with neighbour South Korea weighed on exports.

However, the report showed gains in shipments of semiconductor-making equipment, suggesting a bottoming of the global tech cycle and hint at a recovery.

Added to this, exports to Japan’s largest overseas market, China rose for the first time in 10 months.

Commenting on this, Bloomberg economist, Yuki Masujima said:

‘The phase one trade deal is positive, in that it could help lift demand from China. Without stronger performance in the US, though, exports are likely to remain sluggish overall.’

Yesterday: Sterling (GBP) Gains as Chance of BoE Cut Decreases

The Pound slipped on Thursday, reversing yesterday’s gains as investors moved towards the safe-haven Japanese Yen.

On Wednesday markets saw the chance of a Bank of England (BoE) rate cut decrease to 50%, from 70% on Monday.

Commenting on the likelihood of a BoE cut, Berenberg’s senior economist, Kallum Pickering said:

‘I struggle to make a strong case for a January rate cut. Much of the data, which is weak, is pre-election, so what will matter more to the Bank of England is the PMI data on Friday.’

Tuesday’s data which showed British job growth at close to a one-year high also provided GBP with support.

Pound Japanese Yen Outlook: Will Weak Inflation Weigh on JPY?

Looking ahead to the start of Friday’s session, the Japanese Yen (JPY) could slide against the Pound (GBP) following inflation data.

The Yen could give up today’s gains if December’s inflation disappoints, and does not rise as high as forecast.

Meanwhile, the Japanese Jibun Bank’s flash PMI data could send the currency lower.

If January’s manufacturing and service sectors fall further into contraction, the Pound Japanese Yen (GBP/JPY) exchange rate is likely to rise.