GBP-JPY Trading

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GBPJPY is the ticker symbol for the British pound sterling and the Japanese yen exchange rate. Both currencies are among the top eight global currencies, and as of October 2019, the GBP is the fourth most traded currency, while the JPY takes the third spot. Because the US dollar (USD) is not used when calculating its exchange rate, the GBP JPY is known as a ‘cross pair’, and it falls under the ‘minors’ group in the forex market.

GBP-JPY is almost synonymous with volatility in forex trading; an inherent characteristic that has earned the pair multiple nicknames such as: ‘The Beast’, ‘The Dragon’, ‘The Widow-Maker’, and ‘The Geppy’. In the GBP-JPY forex rate, the GBP is the base currency, while the JPY is the quote currency. This means that at any given time, the price of the GBP JPY pair represents the amount of Japanese yen it would take to exchange for one unit of the British pound sterling.

History of GBP JPY Trading

The GBP JPY combines currencies that have a rich and interesting history. The pound sterling predates modern-day civilisation and has even once been the de facto ‘global’ currency before making way for the US dollar. It evolved into its current form following the 1971 collapse of the Bretton Woods Monetary System. Since then, the GBP has had two major highlights in its price history. On September 16th, 1992, the pound plummeted by more than 25% when the UK was forced to exit the European Exchange Rate Mechanism; a day that would earn the moniker ‘Black Wednesday’. And in 2016, when the UK public elected to leave the European Union (Brexit), the GBP lost more than 10% of its value within a day.

Adopted by the Mejji government in 1871, the Japanese yen is undoubtedly one of the oldest currencies still in circulation today. The yen has always had an interesting price action, owing to Japan’s unique and important position in the global economy. The country features a strong industrial base with an interesting mix of manufacturing, technology and agricultural innovation. As a result, Japan is one of the world’s biggest exporters, a factor that has contributed to occasional government intervention in the forex market to promote the competitiveness of its Japanese products in international markets.

GBPJPY Trading Price History

Volatility has been a permanent feature of the GBP-JPY currency pair, and during the Great Recession, the pair traded from highs of circa 250.00 in June 2007 to lows of circa 120.00 by January 2009. In June 2016, GBPJPY tumbled from highs of circa 160.00 to lows of circa 133.00 in the aftermath of the Brexit vote results. Still, the most important dates for the pair have occurred outside the above periods. The pair printed its all-time high of 1014.00 on January 1st, 1963, while its all-time low of 116.85 was achieved on September 16th, 2011.

Why Trade GBPJPY

Volatility
The GBP-JPY is one of the most volatile pairs in the forex markets. Huge price movements and wide ranges ensure that multiple trading opportunities are generated by this pair in almost all trading sessions.
Carry Trade
The Japanese yen (JPY) is a low yielding currency, while the British pound sterling (GBP) is a high yielding one. This means that the GBPJPY allows for the application of the carry trade strategy by going long with the pair overnight.

Major Bodies Influencing GBPJPY

Bank of Japan
The Bank of Japan (BoJ) is probably the most active Central Bank in the forex market. BoJ has never shied away from intervening in the currency markets to protect its backbone export industry. It is therefore important to track the bank’s monthly rate releases and accompanying rate statements.
Japan Statistics Bureau
As a naturally volatile pair, the GBPJPY overshoots key data releases. Japan’s Statistics Bureau releases major data that can have significant impact on the Japanese yen, and consequently, the GBP JPY price. Look out for important data pieces, such as the Trade Balance and Japan GDP numbers.
Japan Meteorological Agency
A curious highlight, but important nonetheless with Japan as an earthquake-prone nation. The Japanese yen has always been pressured lower when the Earthquake Early Warning (EEW) system delivers harsh warnings.
Bank of England
The Bank of England releases rates and rate statements every month, and this can impact heavily on the pound, and consequently, the GBP-JPY exchange rate.
UK Office of National Statistics (ONS)
The ONS is responsible for producing and publishing important data that can be utilised for both social and economic policy formulation. For GBPJPY traders, it is prudent to track the releases of economic data, such as GDP numbers as well as Labour Market statistics such as the unemployment rate and wage growth figures.

GBPJPY Trading Correlations

The GBPJPY pair has a negative correlation with gold. This means that the pair’s price will tend to rise when that of the precious metal falls, and vice versa. The Japanese yen is considered a safe-haven currency, which validates the GBP-JPY-Gold negative correlation. In addition, the JPY and gold have always been driven by US real-interest rate expectations.

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