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Pound to Japanese Yen Exchange Rate Outlook Dampened by Expectations for Dire UK Holiday Season

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Pound to Japanese Yen Exchange Rate Remains Under Pressure as Safe Haven Demand Persists 

While the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has been unable to hold its best levels this week, the pair has still sustained strong gains this week so far. The Japanese Yen (JPY) doesn’t have much strong support aside from safe haven demand. 

After opening this week at the level of 135.96, GBP/JPY quickly saw a surge in demand as investors sold safe havens and became more willing to take risks. 

In the middle of the week, GBP/JPY touched on a high of 140.14. This was the best level for the pair in two months, since the beginning of September. GBP/JPY has since slipped slightly from those highs but trends in the region of 138.46, still well above the week’s opening levels. 

Looking ahead, disappointing Brexit developments could cause the Pound to Japanese Yen exchange rate to plummet again. 

Pound (GBP) Exchange Rates Hit as Markets Fear Dark Winter for Britain’s Economy 

The Pound is sliding back from days of strong performance today. While this week’s coronavirus vaccine developments were certainly optimistic for Britain’s economic outlook, today’s UK data painted a gloomy picture for the coming months. 

A coronavirus vaccine is still not expected until early 2021 at the very earliest. As a result, markets are calming from this week’s vaccine rally and are becoming more concerned about what is expected to be a poor winter for Britain’s economy. 

The winter holiday period is typically a key one for major economies, with many companies seeing huge business. 

However, with Britain currently in its second lockdown and various restrictions expected to last through December, analysts fear that Britain is headed back for recession instead. 

According to NIESR, the economic thinktank, Britain’s economy will shrink in Q4. 

Japanese Yen (JPY) Exchange Rates Remain Appealing as Coronavirus Cases Rise 

Broad political uncertainty around the US 2020 Presidential Election has softened. However, as markets calm from the election, the threat of the coronavirus Covid19 continue to worsen. 

Coronavirus cases continue to surge in many major economies around the globe, including Britain, Japan, and the US. 

As the Japanese Yen is a currency considered a safe haven, it often strengthens in times of global uncertainty. With the coronavirus pandemic worsening in many parts of the world, the Yen is being buoyed by lingering safe haven demand. 

Market’s aren’t particularly optimistic about Japan’s economic outlook as well. Bank of Japan (BoJ) monetary policy board member Seiji Adachi has expressed concern that the coronavirus resurgence could cause household spending to weaken. 

Pound to Japanese Yen (GBP/JPY) Exchange Rate Awaits Brexit News and Japanese Growth 

The Pound to Japanese Yen exchange rate outlook is limited for the time being, as Britain’s shorter term economic outlook is filled with uncertainties. 

However, the Pound has the potential to advance in the coming weeks if there are optimistic Brexit developments. 

UK and EU officials expect some kind of Brexit deal will be made before the end of the month. If news of a Brexit deal is revealed as soon as next week, the Pound is likely to see a surge in demand as Brexit fears will soften. 

On the other hand, worsening UK-EU relations or no-deal Brexit bets will have the opposite effect. 

The Japanese Yen will continue to be driven more by market shifts in safe haven demand. If global coronavirus fears worsen or if Brexit fears worsen, the safe haven Yen is more likely to strengthen. 

Monday’s Asian session will see the publication of Japan’s Q3 growth rate projections. These are unlikely to be highly influential, but if they disappoint they could limit the Yen’s appeal as a safe haven. 

Overall, the biggest potential influences for the Pound to Japanese Yen exchange rate in the coming week will be Brexit and coronavirus developments.