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Pound Japanese Yen (GBP/JPY) Exchange Rate Steady, Japanese Economic Index Falls to 6-Year Low

GBP/JPY Exchange Rate Rangebound, Japanese Economy Continues to Flag

The Pound Japanese Yen (GBP/JPY) exchange rate held steady today, with the pairing currently trading around ¥143.273 after this morning’s release of the flash Japanese leading economic index for November, which fell to a 6-year low of 90.9.

This has left the Japanese Yen (JPY) subdued against most major currencies, with Japan’s Cabinet Office commenting that the third-largest economy was showing signs of ‘worsening’.

Following on from yesterday’s release of November’s Japanese overall household spending figure, which fell to a worse-than-expected -2%, JPY traders have a lot to be gloomy about as the economy continues to flag.

Yoshiki Shinke, Chief Economist at Dai-ichi Life Research Institute commented:

‘The pace of a pick-up in household spending in November after a huge drop in October is weak. It is unclear if the spending will recover steadily in coming months given the tax burden and tepid wage recovery. Not only consumer-related data, but also other data, especially factory output, are weak. The focus will be how much the economy shrank in the fourth quarter and how much it will recover in the current quarter.’

GBP/JPY Exchange Rate Steady as Brexit Bill is Passed onto the House of Lords

The Pound (GBP) remained relatively unmoved against the Japanese currency after Prime Minister Boris Johnson’s Brexit Withdrawal Agreement Bill passed without much incident through the House of Commons, securing a majority of 99.

Sterling traders are now awaiting the next phase, as the Bill now heads to the House of Commons for further examination. However, the Bill is also expected to pass swiftly, effectively ensuring that the UK will leave the European Union on the 31st January.

However, following yesterday’s dovish analysis of the British economy from the Bank of England’s Governor, Mark Carney, the GBP/JPY exchange rate has remained subdued.

Mr Carney commented:

‘If evidence builds that the weakness in [economic growth] activity could persist, risk-management considerations would favour a relatively prompt response’.

GBP/JPY Outlook: Japanese Trade Balance Figure in Focus

Japanese Yen (JPY) investors will be looking ahead to Monday’s release of November’s trade balance figure, which is forecast to fall from ¥254 billion to ¥-412.6 billion. As a result, we could see the JPY/GBP exchange rate fall on heightened concerns for Japan’s economic performance going into 2020.

Sterling traders, meanwhile, will be keeping a close eye on Monday’s release of November’s UK GDP figure. Any surprise deterioration in the UK’s growth could further push the BoE to take stimulus action in the near-term, a prospect that would prove Pound-negative.

Brexit will also continue to drive the GBY/JPY exchange rate, with any further obstacles ahead of 31st January – or going further into 2020 – weakening the Pound as uncertainty over the UK-EU’s future in trade returns to haunt British markets.