The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate plummeted by around -0.70% on Wednesday morning.
With political uncertainties clouding the outlook for the Pound as we draw ever closer to the UK general election, the British asset softened versus the majority of its most traded currency competitors. The declination was lubricated by a combination of disappointing domestic data and dovish statements from Bank of England (BoE) policymakers.
The Japanese Yen, meanwhile, strengthened versus most of its major peers as the Bank of Japan (BOJ) stated that deflation wouldn’t derail economic recovery and signalled that there was no immediate plan to expand economic stimulus.
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is currently trending in the region of 177.6500.
Pound Sterling (GBP) Exchange Rate Dives as Wage Growth Stumbles
British economic data was particularly disappointing, on the whole, aiding Sterling bearishness. Perhaps one of the most unfortunate results, from a British citizen’s point of view, is a drop in wage growth. Having had a long-term miscorrelation between wages and inflation, the recent wage data has been poorly received.
‘The key strength of the UK economy has been the labour market and the hope and expectation that we’re finally going to get some traction on wages,’ said Mike Amey, a London-based economist. ‘If that traction on wages is pushed back then obviously that pushes back any action from the MPC.’
Minutes from the most recent BoE policy meeting showed that all policymakers stood behind holding interest rates, and the recent poor wage data is likely to ease pressure on the institution to hike rates in the near-future.
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate dropped to a low of 177.4600 today.
Japanese Yen (JPY) Exchange Rate Edges Higher as BoJ Provide Hawkish Economic Report
Although the BoJ’s monthly economic report for March indicated the distinct possibility of negative inflation, the Yen strengthened as policymakers indicated that deflation would not have a detrimental effect on economic recovery.
‘Depending on oil price moves, we can’t rule out the possibility that core consumer prices will fall slightly year-on-year,’ Governor Haruhiko Kuroda told a news conference. ‘For now, I don’t think the underlying slowdown in inflation, driven largely by sharp falls in oil prices, will immediately affect the broad price trend,’ he added.
‘There’s absolutely no change to our stance of aiming to achieve our 2 percent inflation target at the earliest date possible with a time frame of roughly two years,’ said Kuroda, who will mark two years in office on Friday.
Pound Sterling to Japanese Yen (GBP/JPY) Exchange Rate Forecast to Trend Lower
With soft oil prices fuelling demand for safe-haven assets, and with the various downward pressures on the British asset, the Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is likely to continue trending lower over the course of Wednesday’s European session.
Thursday could see heightened GBP/JPY volatility with Japanese Industry Activity data due for publication.
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate has climbed to a high of 179.1800 today.
