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Pound Japanese Yen (GBP/JPY) Exchange Rate Falls as Bank of Japan Dithers on Geopolitical Risks

GBP/JPY Exchange Rate Sinks as BoJ Leaves Policies Unchanged

The Pound Japanese Yen (GBP/JPY) exchange rate is down today and is currently trading around ¥147.4000 on the inter-bank market.

The Japanese Yen (JPY) gained on the Pound (GBP) despite the Bank of Japan’s (BoJ) meeting minutes, which were released last night, indicating increasing disagreements between policy makers over whether the bank should increase monetary stimulus.

One of the members of the BoJ commented:

‘[F]urther analysis and consideration were needed on the relationships between inflation and the levels of interest rates or monetary base.’

Overall the meeting minutes indicated a resolve to reach the inflation targets, with comments that emphasised the need to continue easing and leave policies effectively unchanged.

Today saw the publication of the Japanese Leading Economic Index figures for January, which slipped against December’s 97.2 to 95.9.

Sterling, meanwhile, has weakened on news that a decision to a Brexit delay is not expected to be forthcoming this week.

The President of the European Commission, Jean Claude-Juncker, commented:

‘My impression is … that this week at the European council there will be no decision, but that we will probably have to meet again next week. Mrs May doesn’t have agreement to anything, either in her cabinet or in Parliament.’

GBP/JPY Exchange Rate Falls despite Improving UK CPI Figures

The Pound failed to benefit from the release of the latest UK CPI figures for February which increased to a better-than-expected 1.9% against January’s 1.8%.

The Office for National Statistics commented:

‘The largest, offsetting, downward contribution came from clothing and footwear, with prices rising between January and February 2019 but by less than between the same two months a year ago.’

Following this release was the publication of the UK Retail Price Index figures for February, which increased against January’s -0.9% to 0.7%.

Today also saw the publication of the UK PPI figures for February, which all improved but came in below expectation, leaving many Sterling traders cautious as the UK economy remains sensitive to ongoing Brexit developments.

GBP/JPY Forecast: Sterling Could Rise on Definitive UK-EU Brexit Extension

Japanese banks will be closed tomorrow for the Vernal Equinox, however we will see the publication of the Japanese National Consumer Price Index figures for February, which are expected to increase to 0.3% – possibly providing some further uplift for the Japanese Yen.

These will be followed by the Japanese Foreign Investment in Japanese Stocks figures for March, and with any improvement, this could see the JPY/GBP exchange rate supported.

Tomorrow will also see the Bank of England announce its latest interest rate decision, which is likely to see rates held steady at 0.75%. However, with any indications of a slowing or struggling UK economy due to the increasing fears of a possible no-deal Brexit, we could see the Pound sink.

The GBP/JPY exchange rate will remain dictated by Brexit developments for the coming weeks, and any signs of a definitive extension emerging from the EU could see Sterling show some signs of recovery against the Japanese Yen.