Chance for GBP/JPY Exchange Rate Recovery on UK Services PMI Growth
The Pound (GBP) has fallen by -0.9% against the Japanese Yen (JPY) today, hitting a one-week low with no signs of an imminent recovery.
This sharp decline comes on the news that UK construction sector activity slowed by more than expected in September; another PMI reading is out on Wednesday.
This is September’s services sector PMI, which is expected to show a slowdown in sector activity like today’s construction reading.
It is worth mentioning that a services slowdown isn’t inevitable, as Monday’s UK manufacturing PMI beat forecasts and showed growth instead of contraction.
If the services reading shows similarly unexpected growth then the Pound could rise sharply against the Japanese Yen.
This is because the services sector is the single largest contributor to UK economic growth; it covers areas such as retail sales, tourism and financial services like banking.
GBP/JPY Exchange Rate could Rise on Future UK GDP Growth
Beyond tomorrow’s UK services data, the Pound (GBP) could rise against the Japanese Yen (JPY) on the coming week when UK GDP growth data for August comes out.
Out on 10th October, this data is expected to show a faster pace of economic expansion during the month, from 0.3% up to 0.4%.
While a minor rise on paper, such an increase could still boost GBP demand as it would represent a steady improvement in UK economic performance.
Other data out next Wednesday may not be so supportive, as there have been predictions for lower construction activity.
The GDP data could end up being the deciding factor in GBP/JPY exchange rate performance, as it is seen as a strong indicator of UK economic health.
Japanese Yen to Pound Sterling Predictions: Will Japanese Services Sector Growth Boost JPY/GBP?
The Japanese Yen (JPY) could advance against the Pound (GBP) in the near-future, when Japanese services PMI data comes out early on Wednesday.
Unlike the UK’s services reading for September, the Japanese variant is expected to show growth during the month with a rise from 51.5 points to 51.8.
While small, such a rise could still raise support for the Japanese Yen and push it up against a potentially-weakened Pound Sterling.
Strong Japanese Index Readings could Boost JPY/GBP Exchange Rate
Looking to the end of the week, the Japanese Yen (JPY) could advance against the Pound (GBP) on the coming Friday when key index data comes out.
This will be August’s preliminary coincident index for August, alongside the initial leading economic index for the same month.
Both readings act as a general measure of Japanese economic health and higher scores indicate a better economic performance.
With that in mind, if both readings rise as forecast then the Japanese Yen could also rise against Pound Sterling.
The two indexes have progressively fallen over recent months, so growth in both fields might reassure Yen traders before the weekend.