Exchange rates for the GBPJPY pairing remain extremely changeable. There are a number of reasons for this, including US-China trade negotiations, domestic data and indeed Brexit back in the UK.
|Currency Pair||% Change in 1 month||Difference on £200,000|
Most recently, we have seen rates climb over 1.5% yesterday as a result of Brexit talks progressing. I believe this will be the main driver for the pair in the immediate future.
Longer term, the China-US trade talks are a major factor and one of the main reasons we saw the YEN get over 4% more expensive at the end of October.
The reason for the China-US trade talks being so influential is as China misses trade with the US, they look for additional trade partners. The current tariffs put into place in the US have resulted in ¾ of China's exports to the US being subject to extra tariffs in the New Year. China has now increased trading ties with Japan, which have signed an additional £2.6 billion worth of trade deals. This change within China has also resulted in the yen being seen as a safe haven currency by traders, pushing up its demand and therefore its value.
The Bank of Japan (BOJ) now owns assets worth more than the country’s GDP, following a half-decade spending spree designed to accelerate weak price growth. They reported that they own over $4.87 trillion of assets, more than 5 times the world’s most valuable company, Apple.
This is generally something that clients with a longer term exposure should be well aware of and keep an active eye on.
This week we have also seen key data from Japan show concerns. GDP figures were released yesterday evening and showed a contraction of 1.2%. Today there is industrial data due which is also expected to show a contraction, along with foreign investment data overnight.
In the short term I expect the yen to continue to get cheaper to buy, however medium term I do expect yen sellers to be the winners.
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