Chance of Major Pound Sterling to Japanese Yen (GBP/JPY) Exchange Rate Rise on Services Expansion
Pound Sterling (GBP) has risen by 1.1% against the Japanese Yen (JPY) today, thanks to a positive result for May’s UK manufacturing PMI.
Next week could bring greater gains for the pairing, when the UK services sector PMI for May is scheduled for release.
Economists are divided about how the services PMI will print – some are forecasting a rise from 52.8 points to 54, while others anticipate a drop to 52.2.
A higher services PMI printing could cause the Pound to rise sharply against the Japanese Yen, as the sector is the single largest contributor to UK economic growth.
That said, a sizable decline might trigger a GBP/JPY exchange rate crash, as it could put the PMI near the sub-50 point contraction range.
Accelerating UK Wage Growth could Push GBP/JPY Exchange Rate Higher
Beyond next week’s UK ecostats, the Pound to Yen (GBP/JPY) exchange rate could also advance when average earnings data comes out on 12th June.
The pace of wage growth with bonuses included is tipped to rise from 2.6% to 2.9% during April, which might inspire a major Pound Sterling advance.
A faster pace of wage growth would increase the chances of a Bank of England (BoE) interest rate hike in 2018, especially if the reading rises above the rate of inflation.
Japanese Yen to Pound (JPY/GBP) Exchange Rate Forecast: Are Yen Losses Ahead on GDP Slowdown?
The Japanese Yen (JPY) is at risk of falling sharply against the Pound (GBP) during the coming week, when national GDP data is released on Friday.
Forecasts have been negative across the board, with analysts predicting both the quarter-on-quarter and year-on-year readings to print negatively.
On the quarter, a slump from 0.1% to -0.2% is forecast while a larger annual decline from 0.6% to -0.6% is expected.
There are concerns that the Japanese economy is stuck in a holding pattern of slow economic growth and such results will only reinforce these sentiments.
Negative Machine Orders Reading could Extend JPY/GBP Exchange Rate Losses
Looking further ahead, there are additional risks to the future value of the Japanese Yen (JPY) when machine order figures are revealed on 11th June.
These readings are predicted to show a minor improvement on the year in April, but another negative printing for the monthly figure.
For context, the previous year-on-year reading was a significant drop of -2.4%, while a greater monthly decline of -3.9% was reported.
The machine orders figure has been volatile over 2017 and 2018, with the reading failing to show consistent growth over the period.
If both printings remain negative then the week could begin with Japanese Yen to Pound Sterling (JPY/GBP) exchange rate losses.
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