The Pound Japanese Yen (GBP JPY) exchange rate is rocketing higher this morning as it is suggested that the impact of Brexit can be ‘limited’ by the UK government.
Sterling’s (GBP) Lifted by Brexit Optimism
Sterling sentiment was strengthened this morning as the former head of Treasury and one of the architects of the so-called ‘Project Fear’ paper suggested that the UK government should be able to limit the damage caused by Brexit.
Talking to the Financial Times, Lord Macpherson said;
‘There is still all to play for. If the government relentlessly focuses on achievable outcomes in Brussels and pursues a sensible economic policy at home, it could yet keep any lasting damage from Brexit to a minimum. But that remains a pretty big ‘if’.’
Lord Macpherson, much to the delight of investors also suggests that the UK should attempt to maintain a close relationship with the EU to help minimise the economic consequences of leaving the union.
The next stage of Brexit negotiations are expected to get underway in March, which will see the UK and EU discuss how their future relationship may look, with trade likely to be the main focus for both sides, with the UK government seeking a Canada-style deal.
Japanese Yen (JPY) Weakens as Currency left Directionless
Meanwhile the Japanese Yen slipped at the start of the European session this morning as thin trading volumes over the Christmas period and a lack of fresh trading incentives, kept the currency suppressed.
This follows on from Tuesday’s mixed data which provided little lift for the Yen as a stronger than expected rise in domestic inflation in November was offset by the dovish minutes from the Bank of Japan’s (BoJ) latest policy meeting.
GBP JPY Forecast: Japanese Retail Sales to Rebound?
Looking ahead the GBP JPY exchange rate may slide the start of the Asian session tomorrow as Japan publishes its latest retail sales figures, with economists forecasting that sales growth will have climbed from -0.2% to 1.2% last month.
Meanwhile the Pound may also be weakened tomorrow by the release of the British Bankers Association’s (BBA) latest mortgage figures as analysts predict that home loan approvals will have trended lower in November.
Looking further ahead to next year Sterling is likely to come under pressure in the first quarter of 2018 as the UK government gears up for the second stage of Brexit.
Markets fear that the trade negotiations are likely to be even rockier than the first stage, likely leading to a dip in the Pound.
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