Analytical Perspective on Correlation between Nikkei225 & GBP
By Eric Lee, Sales Director of Phillip Nova
Substantial Upward Trends in GBP/JPY and Nikkei 225 from 2020 to 2024
Over the past 4 years, from 2020 to 2024, both the GBP/JPY exchange rate and the Nikkei 225 index have shown substantial upward trends. The chart below indicates a close correlation between these two financial indicators, particularly from late 2022 to mid2024. The GBP/JPY (in blue) and the Nikkei 225 (in red) have both risen significantly over the observed period, with the Nikkei 225 reaching a recent peak around 40,500 and the GBP/JPY exchange rate climbing to approximately 203.886
Strong Correlation Between GBP/JPY and Nikkei 225 Movements
There are notable periods where the movements of the GBP/JPY and the Nikkei 225 are closely aligned, suggesting a strong correlation between the two. This is particularly evident from late 2022 onwards, where both indices exhibit synchronized peaks and troughs. The Nikkei 225 has experienced periods of high volatility, with sharp rises and falls, particularly in 2023. According to Nikkei Asia, one significant factor contributing to the rise in Japanese stocks is the influx of foreign investment, notably $51 billion led by the U.K. This influx has boosted the Nikkei 225, highlighting the importance of foreign capital in driving market performance
asia.nikkei.com/Business/Markets/Japan-stocks-boosted-by-51bn-in-foreign-cash-led-by-U.K
Impact of GBP/JPY Exchange Rate on Japanese Equity Investments
A strong GBP/JPY rate can indicate increased purchasing power for British investors, enabling them to invest more heavily in Japanese equities. The recent surge in the Nikkei 225 aligns with the period of increased foreign investment, as highlighted by the $51 billion influx led by U.K. investors. Currency strength often reflects broader economic sentiment. A rising GBP/JPY rate can signal confidence in the U.K. economy, encouraging investment in higher-yielding assets like Japanese stocks. Conversely, a weaker JPY can make Japanese exports more competitive, boosting corporate profits and positively impacting the Nikkei 225. Fluctuations in the GBP/JPY rate can influence global risk appetite. A stronger GBP against the JPY might indicate a shift towards riskier assets, including equities in robust markets like Japan
UK Consumer Confidence and Its Correlation to GBP and Nikkei 225
According to data from GfK, the Consumer Confidence indicator in the UK rose to -14 in June 2024 from -17 in May, marking the third consecutive month of improvement and reaching its highest level since November 2021, surpassing forecasts of -16. That may explain the strength in GBP and its correlation to Nikkei225 as well.
Global Financial Interconnectivity and Strategic Insights for Traders
In conclusion, the global financial market is highly interconnected. The influx of foreign capital, particularly from U.K., has significantly boosted Japanese stocks, driving Nikkei225 to new heights. Thus, when trading a stock index such as Nikkei225, traders should consider the influence of currency movements and the dynamics the economic performance of related countries can have in providing valuable insights in their strategic decision making
Trade Nikkei 225 at only 50 cents* now
Capitalise on the Nikkei 225’s movements—trade SGX Nikkei 225 Index Futures at only 50 cents* now and stand to win a pair of air tickets to Japan. Learn more here.
*For applicable terms and conditions and a full risk disclaimer, please refer to phillipnova.com.sg. This ad has not been reviewed by the MAS
Substantial Upward Trends in GBP/JPY and Nikkei 225 from 2020 to 2024
Over the past 4 years, from 2020 to 2024, both the GBP/JPY exchange rate and the Nikkei 225 index have shown substantial upward trends. The chart below indicates a close correlation between these two financial indicators, particularly from late 2022 to mid2024. The GBP/JPY (in blue) and the Nikkei 225 (in red) have both risen significantly over the observed period, with the Nikkei 225 reaching a recent peak around 40,500 and the GBP/JPY exchange rate climbing to approximately 203.886
Strong Correlation Between GBP/JPY and Nikkei 225 Movements
There are notable periods where the movements of the GBP/JPY and the Nikkei 225 are closely aligned, suggesting a strong correlation between the two. This is particularly evident from late 2022 onwards, where both indices exhibit synchronized peaks and troughs. The Nikkei 225 has experienced periods of high volatility, with sharp rises and falls, particularly in 2023. According to Nikkei Asia, one significant factor contributing to the rise in Japanese stocks is the influx of foreign investment, notably $51 billion led by the U.K. This influx has boosted the Nikkei 225, highlighting the importance of foreign capital in driving market performance
asia.nikkei.com/Business/Markets/Japan-stocks-boosted-by-51bn-in-foreign-cash-led-by-U.K
Impact of GBP/JPY Exchange Rate on Japanese Equity Investments
A strong GBP/JPY rate can indicate increased purchasing power for British investors, enabling them to invest more heavily in Japanese equities. The recent surge in the Nikkei 225 aligns with the period of increased foreign investment, as highlighted by the $51 billion influx led by U.K. investors. Currency strength often reflects broader economic sentiment. A rising GBP/JPY rate can signal confidence in the U.K. economy, encouraging investment in higher-yielding assets like Japanese stocks. Conversely, a weaker JPY can make Japanese exports more competitive, boosting corporate profits and positively impacting the Nikkei 225. Fluctuations in the GBP/JPY rate can influence global risk appetite. A stronger GBP against the JPY might indicate a shift towards riskier assets, including equities in robust markets like Japan
UK Consumer Confidence and Its Correlation to GBP and Nikkei 225
According to data from GfK, the Consumer Confidence indicator in the UK rose to -14 in June 2024 from -17 in May, marking the third consecutive month of improvement and reaching its highest level since November 2021, surpassing forecasts of -16. That may explain the strength in GBP and its correlation to Nikkei225 as well.
Global Financial Interconnectivity and Strategic Insights for Traders
In conclusion, the global financial market is highly interconnected. The influx of foreign capital, particularly from U.K., has significantly boosted Japanese stocks, driving Nikkei225 to new heights. Thus, when trading a stock index such as Nikkei225, traders should consider the influence of currency movements and the dynamics the economic performance of related countries can have in providing valuable insights in their strategic decision making
Trade Nikkei 225 at only 50 cents* now
Capitalise on the Nikkei 225’s movements—trade SGX Nikkei 225 Index Futures at only 50 cents* now and stand to win a pair of air tickets to Japan. Learn more here.
*For applicable terms and conditions and a full risk disclaimer, please refer to phillipnova.com.sg. This ad has not been reviewed by the MAS
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