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Pound Sterling to Japanese Yen Exchange Rate Avoids Further Losses amid Risk-Sentiment

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Pound to Japanese Yen Holds above Week’s Opening Levels despite Weak UK Data

Despite recent UK data falling short and concerning investors, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has avoided losses this week and continues to trend with an upside bias.

Since opening yesterday at the level of 143.20, GBP/JPY briefly jumped and touched on a high of 144.11 yesterday. GBP/JPY couldn’t sustain its gains, but continued to trend just above the week’s opening levels at the time of writing.

It followed last week’s GBP/JPY tumble, as Brexit uncertainties and poor UK data dragged Sterling (GBP) lower and the pair fell from its best levels since December.

Investors still have little reason to buy Sterling amid a lack of developments over Brexit and weak UK data. However, weakness in safe haven currencies and slightly stronger demand for riskier currencies kept pressure on the safe haven Japanese Yen (JPY).

Pound (GBP) Exchange Rate Outlook Weak as UK Data Reflects Brexit Jitters

There is still no clarity on how exactly the Brexit process will unfold, and last week’s developments in UK Parliament did little to change that.

MPs voted in favour of the government attempting to renegotiate the contentious issue of the Irish backstop, but the EU has reasserted that it is united in support of the backstop and would not be changing its position.

The UK government is set to present its Brexit vision in Ireland, but analysts remain doubtful that a resolution that changes the domestic popularity of the backstop can be reached.

As a result, there is still uncertainty over how exactly the Brexit process will unfold, and this is having a deepening impact on UK businesses too.

Britain’s January PMIs all printed short of expectations as Brexit fears hit business activity. Analysts even speculated that Britain’s manufacturing sector could be headed towards recession.

Japanese Yen (JPY) Exchange Rate Demand Limited on Risk-Sentiment

Investors were hesitant to buy the Japanese Yen too much versus the Pound, despite the Pound’s broad weakness. This prevented the Pound to Japanese Yen exchange rate from tumbling below the week’s opening levels.

The latest Japanese Yen weakness was due to a lack of demand for safe haven currencies. Investors were more willing to take risks following recent Central Bank news.

Last week saw the Federal Reserve taking a more dovish stance on US monetary policy, and this week’s Reserve Bank of Australia (RBA) policy decision was a little less dovish than expected.

As a result, investors looked towards riskier investments and the Japanese Yen’s appeal was limited.

The Japanese Yen also failed to benefit from Japan’s January services PMI from Nikkei, which edged slightly higher from 51.0 to 51.6.

Pound to Japanese Yen (GBP/JPY) Exchange Rate Movement Could be Limited without Brexit Developments

Some notable UK and Japanese news will come in over the next few days, but they are unlikely to cause a major shift in the Pound to Japanese Yen exchange rate.

Instead, investors are more likely to be influenced by political developments. For example, any potential Brexit news could influence the Pound while the Japanese Yen will likely be influenced by potential shifts in risk-sentiment.

If there are any signs that UK-EU Brexit negotiations could lead to concessions or that the formal Brexit date could be delayed past March, the Pound outlook would rise.

Similarly, the Japanese Yen could see stronger demand if investors become less willing to take risks. If US-China trade tensions worsen, for example, risk-sentiment could worsen.

Other news on the way includes Japan’s December coincident index and leading economic index on Thursday, as well as the Bank of England’s (BoE) February policy decision which could influence the Pound to Japanese Yen (GBP/JPY) exchange rate.