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Pound Sterling Japanese Yen (GBP/JPY) Exchange Rate Dips as UK PM Granted Two-Week Brexit Extension

Pound Japanese Yen (GBP/JPY) Exchange Rate Slumps as PM Granted Two-Week Article 50 Extension

The Pound Japanese Yen (GBP/JPY) exchange rate slipped over the course of the morning before attempting to claw back some of its losses.

The pairing is currently trading at an inter-bank rate of ¥145.0650.

On Thursday the European Union leaders’ summit concluded by granting Prime Minister Theresa May with a short Brexit extension.

Leaders agreed to a short unconditional two-week extension to 12 April, with the provision of a longer extension to 22 May if Parliament accepts May’s withdrawal agreement.

By this date, the UK will then have to decide between accepting a longer extension and subsequently taking part in the European elections, or crashing out of the EU without a deal.

European Council President Donald Tusk said that all Brexit options would remain open until 12 April, and stated:

‘The UK government will still have a choice between a deal, no deal, a long extension or revoking Article 50.

‘The 12 April is a key date in terms of the UK deciding whether to hold European Parliament elections.

‘If it has not decided to do so by then, the option of a long extension will automatically become impossible.’

Japanese Yen (JPY) Rises despite Manufacturing Falling at Fastest Pace in Almost Three Years

The Nikkei flash Japanese Manufacturing PMI found that manufacturing output fell at its fastest pace in almost three years.

March’s PMI remained unchanged at 48.9, with data showing that there were further production cutbacks due to weaker new orders.

Despite this, the Pound Japanese Yen (GBP/JPY) exchange rate slipped over the course of the morning.

Commenting on the downturn, Economist at IHS Markit, Joe Hayes said:

‘Further struggles for Japanese manufacturers were apparent at the end of Q1, with latest flash PMI data showing a sustained downturn. Slack demand from domestic and international markets prompted the sharpest cutback in output volumes for almost three years. With input purchasing falling, firms appear to be anticipating further troubles in the short-term. Indeed, concern of weaker growth in China and prolonged global trade frictions kept business confidence well below its historical average in March.’

Pound (GBP) Slips as BoE Leaves Interest Rates Unchanged

On Thursday, the Bank of England (BoE) left interest rates unchanged amid continued uncertainty over Brexit.

All nine members of the Monetary Policy Committee (MPC) voted to keep interest rates at 0.75%.

The MPC made it clear that interest rates could be ‘in either direction’ with this would depend ‘significantly on the nature and timing of EU withdrawal.’

Following this, the Pound (GBP) rose against the Japanese Yen (JPY) before slumping once again as Brexit pessimism and the threat of a no-deal weighed on Sterling.

Pound Japanese Yen Outlook: Will the GBP/JPY Exchange Rate Slide as Japanese Activity Rises?

Looking ahead to the start of next week, the Japanese Yen (JPY) could rise against the Pound (GBP) following the release of January’s All Industry Activity Index.

If activity rises by 0.2% as forecast it could buoy the Japanese Yen.

However, the Yen could slide once again following a speech from the Bank of Japan’s (BoJ) Yutaka Harada.

If Harada’s speech takes a dovish tone, and he comments on the recent slump in manufacturing it could weigh on the Japanese Yen.

Brexit is likely to remain one of the main catalysts in the pairing, as the Prime Minister is aiming to build support for her withdrawal agreement.

If Theresa May is able to get MPs to get Parliament to pass her deal during a third ‘meaningful vote’, the Pound Japanese Yen (GBP/JPY) exchange rate could rise.