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Pound Sterling to Japanese Yen (GBP/JPY) Exchange Rate Trending within Limited Range on BOJ?s Flawed Inflation Goal

Published: 16 Jul at 5 PM Tags: Pound Sterling, Euro Exchange Rate, Currency Exchange, Forex, Euro Crisis, Yen Exchange Rate, Exchange Rates, Inflation,

The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trending within a limited range during Thursday’s European session.

The British asset strengthened versus many of its currency rivals on Thursday despite a complete absence of domestic data to drive changes. The appreciation is the result of recovering Wednesday’s losses amid poor domestic data results. However, despite the fact that earnings data missed estimates; wage growth still accelerated at the fastest pace in over five years which prompted futures traders to bring forward bets as to the timing of a Bank of England (BoE) benchmark rate increase. Strategists from UBS are predicting a bullish Pound as positive sentiment from BoE officials has prompted some traders to predict that the BoE will hike the rate in line with the Federal Reserve.

The Japanese Yen, meanwhile, advanced versus some of its currency competitors during Thursday’s European session thanks to demand for safe-haven assets amid geopolitical upheaval in Europe. However, the gains were slowed amid concerns that the Bank of Japan’s (BOJ) inflation target is flawed and risks an upward price spiral. Ex BOJ Deputy Head Kiyohiko Nishimura warned that prices of many products will need to outpace the inflation target of 2.0% in order to make up for a drag on the inflation index from distorted housing costs within the gauge. ‘The BOJ may say there’s 2 percent inflation, but if ordinary people perceive it to be 3 percent, inflation expectations will be more than it predicts. That could lead to an upward spiral in inflation.’

The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate is currently trending in the region of 193.5600.

Looking ahead, Friday will see a complete absence of Japanese economic data to drive changes. Therefore, the Yen is likely to see changes as a result of market sentiment amid geopolitical developments in Greece. Any news from the Bank of Japan may also impact on Yen volatility.

Similarly, the British economic docket on Friday is completely absent of economic data to provoke Sterling changes. Developments in Europe will likely impact on the British asset given that the Eurozone is Britain’s largest trading partner.
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was trending within the range of 193.0200 to 193.8900 during Thursday’s European session.