Pound to Japanese Yen Exchange Rate Benefits from Risk-On and Brexit Speculation
Despite concerns that UK-EU Brexit negotiations will not be hugely productive, as well as the formal Brexit date drawing ever nearer, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been able to hold most of the past week’s gains.
GBP/JPY opened the week at the level of 142.45 and spent most of the week climbing. On Wednesday, GBP/JPY touched on a high of 144.98 – the pair’s best level this year so far.
While GBP/JPY has slipped since then, it still trended near the level of 144.00 at the time of writing on Friday and was on track to end the week over a Yen higher.
The primary reason for the Pound’s (GBP) gains this week have been speculation that the UK and EU could make the Brexit deal more appealing for UK Parliament.
GBP/JPY has been able to climb more easily though, due to higher market risk-sentiment keeping pressure on safe haven currencies like the Japanese Yen (JPY).
Pound (GBP) Exchange Rates Sustaining Gains amid Brexit Hopes
Speculation that the UK and EU were getting closer to some kind of agreement on how to alter the wording of the Brexit deal and make it more appealing to UK MPs has been the driving force of Pound strength this week.
However, it has not had a lasting impact on the Pound outlook as the Brexit process is still shrouded in uncertainties.
There is still no clarity over how Brexit will unfold. Hopes that these fresh negotiations will make the Brexit deal popular enough to pass through UK Parliament and finally solidify a Brexit path have kept the Pound from further weakness.
No-deal Brexit concerns persist though, as time is running out before the formal Brexit date on the 29th of March.
UK political uncertainties remain concerning for investors as well, as multiple MPs have split off from Britain’s Labour and Conservative parties over the past week in protest of Brexit stances and other issues.
Japanese Yen (JPY) Exchange Rates Lack Drive to Rebound
Investors have been hesitant to buy the Japanese Yen for most of this week, as investors find riskier currencies more appealing amid the latest developments in global trade news and central bank comments.
The Japanese Yen is a safe haven currency, and it typically benefits in times of global market uncertainty.
With US-China trade negotiations going well and global central banks taking more cautious stances, investors are more willing to take risks again and this has weighed on the Japanese Yen outlook.
Bank of Japan (BoJ) Governor Haruhiko Kuroda indicated this week that the bank was willing to further ease Japanese monetary policy if necessary, which weighed further on the Yen outlook.
To round off the week, Japan’s January inflation rate results met expectations, slowing to just 0.2% year-on-year and giving investors little reason to buy the Yen.
Pound to Japanese Yen (GBP/JPY) Exchange Rate Outlook to be driven by Brexit Developments
Brexit developments and uncertainties continue to drive the Pound and the British currency’s outlook, so any developments in the coming week are most likely to influence the direction of the Pound to Japanese Yen (GBP/JPY) exchange rate.
Investors hope that UK and EU negotiators will find some kind of agreement that could see the Brexit plan return to UK Parliament with stronger support.
Any signs that the Brexit plan could succeed at its next run through Parliament, or that the formal Brexit date could be officially delayed, would bolster the Pound outlook.
Meanwhile, the Japanese Yen’s movement will be influenced by shifts in risk-sentiment.
Optimistic trade developments would make investors more willing to take risks and make the safe haven Yen less appealing.
Upcoming Japanese data includes retail sales and manufacturing stats, which could also influence the Pound to Japanese Yen (GBP/JPY) exchange rate.