GBP to JPY Exchange Rate Strengthens; UK Consumer Confidence Bolsters Sterling
Ukrainian President Petro Poroshenko has confirmed an invasion by Russian forces in the eastern part of the country. The announcement has seen an immediate strengthening of the Japanese Yen, and is likely to continue if the tensions escalate.
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The British economic data docket has been particularly sparse this week with a distinct lack of influential market moving data publications. The Pound has generally continued the downward trend, experienced at the tail end of last week, after less-than-impressive retail sales data.
Ongoing unease surrounding the Scottish bid for independence has not helped Sterling regain losses. As the debate continues to produce more questions than answers; many traders have pulled away from the Pound in favour of more stability and less risky currencies.
Another contributing factor to the bearish behaviour of Sterling is the succession of soft Eurozone economic data. The Eurozone and the UK has a very strong trading relationship, so poor Eurozone data has an adverse effect on the Pound. Perhaps the most detrimental of all the negative Eurozone data was the manufacturing data from Thursday of last week. The Eurozone Manufacturing PMI was forecast to drop to 51.3 from 51.8 but the actual result printed at 50.8.
Similar to that of the UK, there has been very little Japanese economic data of huge weighting in terms of wider market movement this week.
Tuesday saw year-on-year Japanese Corporate Service Price hit the 3.7% forecast, but Small Business Confidence fell below the forecast figure of 49.5 to 47.7.
The Pound Sterling to Japanese Yen exchange rate has hit a low today of 171.5900.
Once again there are very few domestic data releases pertaining to the UK on Thursday, and none of particular importance or influence on market movement. The Lloyds Business Barometer fell from 52 to 47, and the CBI Reported Sales exceeded the forecast figure of 27 printing at 37.
The Japanese Yen has strengthened considerably over the course of Thursday as a result of mounting geopolitical tensions between Russia and Ukraine.
Ukraine’s President Petro Poroshenko announced that Russia had invaded the war-torn eastern area of the country in order to support separatists fighting there. The head of the self-declared Donetsk People’s Republic, Alexander Zakharchenko, gave an interview on Russian television in which he said; ‘Among the Russian volunteers there are many former soldiers, who are fighting alongside us and understand that it’s their duty, […] And moreover, I’ll say it openly, we also have current soldiers, who decided to take their holidays not on the beach, but among us’.
The rising tension, which has increased significantly since the recent meeting between the Presidents of both countries, has knocked traders into risk aversion mode. Eimear Daly, the head of market analysis at London-based broker Monex Europe Ltd, stated; ‘Markets have finally been shaken from their slumber and moved into risk-off mode […]If Ukraine wants to win the war against separatists they need to do it soon, which means we are entering several months of heightened geopolitical risk’.
It is likely, therefore, that the Yen will continue to strengthen across the board until the situation between Russia and Ukraine has abated.
The Pound Sterling to Japanese Yen has hit a high today of 172.2900.
Despite trader risk aversion giving a boost to the safe haven yen; the Pound has rallied versus the Japanese Yen after a set of positive UK economic data publications have finally halted the Pound’s downward trend.
The British GfK Consumer Confidence Survey was forecast to retract by -1 but the actual data revealed a surplus figure of 1.
Also the year-on-year Nationwide House Px was forecast to grow by 10.2% but the actual result exceeded expectations posting at 11.0%.
The safe haven qualities of the Yen are enough to prevent a momentous decline, but the Yen has softened across the board after their domestic data publications left a lot to be desired. The Jobless rate increased by 0.1% over forecast, printing at 3.8%.
Japanese Industrial Production fell well below the forecast figure of -0.1%, printing at -0.9%. Large Retailers’ Sales failed to meet with expectations and printed at -0.6%. Also the year-on-year Housing Starts retracted well beyond the forecast figure of -10.5% with the actual result f -14.1%.