GBP/JPY Exchange Rate Buoyed by Brexit Optimism but Gloomy UK PMIs Keep the Pound in Check

GBP/JPY Exchange Rate Rally Dented by Underwhelming PMIs

The Pound Japanese Yen (GBP/JPY) exchange rate opens this week on the front foot, but its early gains have been trimmed in the wake of some lacklustre UK PMI figures.

At the time of writing the GBP/JPY exchange rate is trading at around ¥146.3620, up nearly 0.4% from the day’s opening levels.

Pound’s (GBP) Brexit Cheer Tempered by Poor PMIs

The Pound (GBP) has gotten off to a bit of a mixed start this week, after it was forced to walk back some of its initial gains.

Sterling enjoyed some solid support at the outset of the session, spurred higher on the back of renewed Brexit optimism after Boris Johnson secured a convincing majority in last week’s general election.

Johnson is expected to bring his EU withdrawal bill before the new parliament by the end of the week, which GBP investors hope will help to clear some of the Brexit uncertainty which has hung over the UK economy for three years.  

However the Pound’s rally was quickly cut short by the publication of the UK’s flash PMI figures, which revealed the private sector in December suffered its worst contraction in growth in over three years.

The slump was attributed to heightened political uncertainty and sparks fears that the UK economy will have shrunk in the fourth quarter.

The publication of the UK’s employment report, another key indicator of growth, could add to the pressure on Sterling on Tuesday as economists forecast wage growth will have fallen sharply in October.

Japanese Yen (JPY) Side-lined by US-China Trade Hopes

Meanwhile, the Japanese Yen (JPY) is on the back foot this morning as demand for the safe-haven currency has been clipped by hopes for a US-China trade deal.

This comes after Washington and Beijing held separate press conferences on Friday, in which they announced that a phase one trade deal had been agreed.

Markets welcomed the announcement, but some observers still remain wary of the deal actually being ratified. Analysts at Danske Bank warn:

‘While this is good news, the unorthodox process of the announcement and the mixed signals from each side suggest that things are not smooth behind the scene.’

JPY investors will keep a close eye on developments over the coming weeks as the outcome of the deal is likely to be a key catalyst of movement for the currency.