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Pound Japanese Yen Exchange Rate Edges Higher as UK Services Sector Growth Hits 24-Year High in May

Published: 3 Jun at 2 PM Tags: Pound Sterling, Currency Exchange, Yen Exchange Rate, UK, Exchange Rates, Economy,

The Pound Japanese Yen exchange rate rose by 0.2% today as UK service sector growth hit a 24-year high in April. The pairing is currently fluctuating around ¥ 155.67.

Sterling benefited from the release of the latest UK services PMI for May today, which beat forecasts and rose from 61.0 to 62.9 last month.

Tim Moore, economics director at IHS Markit, commented on the figure, highlighting the increasing chances of strong growth this quarter:

‘UK service providers reported the strongest rise in activity for nearly a quarter-century during May as the roll back of pandemic restrictions unleashed pent up business and consumer spending. The latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns.’

Added to this, this week saw Tuesday record zero deaths from Covid-19 in the UK.

As a result GBP investors have become more optimistic about the outlook about the economy in the months ahead, particularly in the summer months.

Prime Minister Boris Johnson has also reiterated his stance that the 21 June final easing of lockdown restrictions will still go ahead.

Nevertheless, Johnson did suggest that data remains too ‘ambiguous’ on whether or not enough people have been vaccinated to completely ease all lockdown restrictions.

The Japanese Yen has suffered from risk-on market mood today as investors seek out riskier assets instead.

However, Japan’s Covid-19 vaccination has picked-up after a long delay, buoying confidence in the outlook for the Japanese economy.

In Japanese economic news, today saw the release of May’s services PMI for May. The figure fell from 49.5 to 46.5.

Usamah Bhatti, Economist at IHS Markit, commented:

‘The Japanese services economy faced a sharper downturn in demand conditions in the middle of the second quarter. Latest PMI data signalled a quicker decline in both business activity and new orders, the fastest since February. Panel members highlighted that a surge in COVID-19 infections and the subsequent implementation of another state of emergency dampened output and demand further.’

Looking ahead, Japanese Yen investors will eye tomorrow’s release of the latest Japanese overall house hold spending data for April.

If the outlook for the Japanese economy improves, however, then the JPY/GBP exchange rate could head higher.

With the outlook for the UK economy however improving and the nation’s Covid-19 death toll remaining low, however, the Pound Japanese Yen exchange rate could continue to rise into the weekend.