As expected a month earlier, a trend reversal occurred. Since March the rates have continued within a weak downward trend in favor of the JPY. Both currencies are currently weakened under the influence of negative factors, but the yen, which periodically receives support as a safe asset, turned out to be stronger.
The situation in the British economy is slightly better than in the EU as a whole, despite the fact that for a long time it has been operating in conditions of uncertainty due to Brexit. However, the risks associated with Brexit do not allow the Bank of England to reconsider its soft monetary policy. This week the rate was left unchanged, despite an increased forecast about GDP growth. At the moment the political crisis does not allow us to expect any improvement in the British economy and clarifications about the situation with the exit from the EU. As we approach the final date of Brexit, the Pound will experience increasing pressure.
In Japan this week the markets are closed for a holiday. Nevertheless, the JPY was under pressure amid optimism on the market associated with the announcement of the completion of negotiations between the US and China, and the conclusion of the deal before the end of next week. In any case, the JPY has a good chance to continue strengthening against the GBP, given the difficult economic situation in the EU and directly in the UK.
Next week will be much more volatile for this currency pair. The minutes of the Bank Of Japan meeting on monetary policy, the index of household expenditure in Japan and quarterly data on the GDP of Britain will be published. We suppose that the JPY will be under more pressure than the pound, so in the near future, the most effective would be the deals against the trend. In anticipation of good news from China, safe assets will not be in high demand among investors, and macroeconomic reports from Japan are unlikely to impress them. Also, we cannot count on tightening the monetary policy of the Bank Of Japan, which could strengthen the JPY. The Stochastic oscillator indicates the rates in the oversold zone, which also speaks in favor of the deals to Buy in the near future. In the long term, the deals on the trend will still be relevant.
