CFD Trading Rate Great Britain Pound vs Japanese Yen (GBPJPY)

• GBP/JPY loses ground on Wednesday as JPY strengthens on BoJ’s contemplation of a rate hike.
• Upbeat Japan’s producer inflation data could reinforce the BoJ to raise rates soon.
• Japanese firms have agreed to the demands for pay increases of 5.85% this year.

GBP/JPY retraces its recent gains recorded on Tuesday, slipping to near 188.70 during the Asian trading session on Wednesday. The Japanese Yen (JPY) is bolstered by market speculation that the Bank of Japan (BoJ) is contemplating an interest rate hike in March.

Furthermore, Japan's spring wage negotiations showed that firms have acquiesced to the demands of the country's largest trade union confederation, Rengo, for pay increases of 5.85% this year, surpassing 5.0% for the first time in 30 years. Additionally, Japan's Chief Cabinet Secretary Yoshimasa Hayashi expressed his desire to see widespread wage hikes across the economy.

The higher-than-expected producer inflation data from Japan reinforces the belief that the Bank of Japan (BoJ) could commence raising rates soon, bolstering the JPY and consequently weakening the GBP/JPY cross.

On Tuesday, UK Average Earnings Including Bonuses for the period from November 2023 to January 2024 eased to 5.6% from 5.8% in the previous reading, while annual wage growth excluding bonuses dropped to 6.1% compared to 6.2% previously. The likelihood of rate cuts by the Bank of England (BoE) this year increased marginally, with traders now expecting three rate cuts.

The Pound Sterling (GBP) has recently emerged as one of the top two performers among the major currencies. Economists at Commerzbank are analyzing the outlook for the GBP, though uncertainty remains regarding how long the Pound's strength will persist. Presently, the GBP's strength appears somewhat fragile.

• GBP/JPY up as BoJ's Ueda's cautious view weakens Yen.
• UK jobs disappoint, and higher unemployment and lower wages hurt the Pound, as peculation on BoE rate cuts increased.
• BoE Bailey: Central banks need to evaluate how restrictive rates need to be.

The GBP/JP/registered modest gains of 0.29% in the mid-North American session after Bank of Japan (BoJ) Governor Kazuo Ueda's speech weakened the Japanese Yen on cautious remarks. Despite that, the Pound Sterling was capped by a softer-than-expected UK employment report. The pair exchanged hands at 168.72 after hitting a daily low of 187.97.

BoJ Governor’s Ueda remarks and UK employment data, weighed on the JPY

During the Asian session, BoJ Kazuo Ueda said the economy is recovering modestly and still shows signs of weakness following weak data releases. Ueda acknowledged that consumption of food and daily necessities is weakening as prices climb. He added that household spending is improving moderately and is awaiting higher wages.

BoJ Governor Ueda failed to provide forward guidance regarding ending negative rates. According to Bloomberg, sources said the BoJ is considering increasing borrowing costs in March, though the outcome of the decision is still too close to call between the March and April meetings.

Lately, Bank of England Governor Andrew Bailey has been making headlines by saying that major central banks need to question how restrictive their policy is and how long it needs to stay put. Bailey added that policy is doing its job and noted that inflation expectations are well anchored.

On the data front, the latest jobs data in the UK witnessed a jump in the unemployment rate, from 3.6% to 3.9% YoY, as 21,000 jobs were cut from the workforce. Wage growth slid from 6.2% to 6.1% in the last quarter of 2023, said the Office for National Statistics (ONS). After the data, markets increased bets on a BoE rate cut in June, though the first fully priced-in rate cut is expected in August.

GBP/JPY Price Analysis: Technical outlook

The daily chart portrays the pair as neutral to upward biased, and if buyers achieve a daily close above the March 11 open of 189.14, that could open the door for further upside. In that case, the next resistance level is seen at the Tenkan Sen at 189.57, followed by the 190.00 psychological level. On the flip side, the first support would be the 50-day moving average (DMA) at 187.84, followed by the February 8 low of 186.86.

• GBP/JPY gains strong positive traction on Tuesday in reaction to dovish BoJ comments.
• The mixed UK jobs report prompts some GBP selling and caps the upside for the cross.
• The fundamental backdrop warrants caution before placing aggressive bearish bets.

The GBP/JPY cross stages a goodish recovery from sub-188.00 levels on Tuesday and for now, seems to have snapped a five-day losing streak to a nearly one-month low touched the previous day. Spot prices, however, retreat a few pips from the daily peak in reaction to mixed UK monthly jobs report and currently trade around the 188.75 region.

The UK Office for National Statistics (ONS) reported that the number of people claiming unemployment-related benefits rose to 16.8K in February as compared to the previous month's downwardly revised reading of 3.1K and the 20.3K expected. The better-than-anticipated headline number, however, was offset by an uptick in the unemployment rate to 3.9% during the three months to January and a slight moderation in the UK wage growth data. This, in turn, prompts some selling around the British Pound (GBP) and the GBP/JPY cross.

Market participants, however, seem convinced that the Bank of England (BoE) to keep interest rates higher for longer despite a sluggish economy. This, in turn, might hold back the GBP bears from placing aggressive bets. Meanwhile, the Bank of Japan (BoJ) Governor Kazuo Ueda fell short of providing any hints about exiting negative rates or scrapping the Yield Curve Control (YCC) policy. This, along with a generally positive risk tone, is seen weighing heavily on the Japanese Yen (JPY) and should contribute to limiting the downside for the GBP/JPY cross.

• GBP/JPY down, near 188.04, on BoJ policy change rumors.
• Sterling's future uncertain without UK data; employment figures crucial.
• Technical signs suggest more drops; key support levels watched.

The GBP/JPY clings to the 188.00 figure and prints losses of 0.51% in the mid-North American session. The pair exchanges hands at 188.04 after dropping from a daily high of 189.17.

Rumors about a sudden end of negative interest rates by the Bank of Japan (BoJ) sponsored a leg up in the Yen against most G7 currencies. An absent UK economic docket keeps Sterling pressured, though employment figures could favor Cable on Tuesday.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY has extended its losses below the Tenkan and Kijun-Sen levels, which exacerbated a drop to a four-week low of 187.95. However, buyers lifted the exchange rate, and the pair has bottomed out around the 188.00 mark as of writing. A daily close above the latter and a leg-up could be on the cards.

Otherwise, the downtrend could extend towards the 50-day moving average (DMA) at 187.64, followed by the 187.00 mark. Once cleared, the next support would be the 100-DMA at 185.77.

GBP/JPY Price Action – Daily Chart

• GBP/JPY's descent under the 190.00 mark aligns with a broader downward trend, eyeing further technical levels.
• A pivotal close below the February 29 low could open paths towards 188.73 Kijun-Sen and beyond.
• Recovery hinges on reclaiming ground above 189.00, with resistances waiting at 189.71 and the early March highs.

The GBP/JPY fell for the fourth straight day late in the North American session, set to finish the week with losses of 0.44%, below the 190.00 threshold. At the time of writing, the cross trades at 188.98, down 0.31%.

GBP/JPY Price Analysis: Technical outlook

After diving below February 29 low of 189.04, the GBP/JPY has tilted to the downside, but sellers need to achieve a daily close below that level, so they test the Kijun-Sen at 188.73. Further losses are seen at 188.00, followed by the 50-day moving average (DMA) at 187.47.

On the other hand, if buyers move in and the pair prints a close above 189.00, that could sponsor a leg up. The first resistance would be the Tenkan-Sen at 189.71, followed by the March 7 high at 190.14. the next ceiling level would be the March 4 high at 191.18.

GBP/JPY Price Action – Daily Chart

• GBP/JPY finds an intermediate support near 188.60. More downside likely on BoJ rate hike bets.
• BoJ policymakers see a positive cycle for wage growth, able to keep inflation above 2%.
• The Pound Sterling will be guided by the UK’s labor market data, scheduled for next week.

The GBP/JPY pair discovers temporary support near 188.60 after sharply correcting from 191.00 in the last three trading sessions. The asset is expected to witness more downside as market expectations for the Bank of Japan (BoJ) abandoning negative interest rates have improved.

A few BoJ policymakers expect a positive cycle in wage growth, improving the odds of inflation remaining above the 2% target sustainable. The BoJ had been reluctant to exit the expansionary policy stance as policymakers were not convinced that wage growth would continue to grow steadily. Investors hope the BoJ will shift to policy normalization in the March monetary policy meeting.

The Japanese Yen would witness strong buying interest if the BoJ delivers a hawkish interest rate decision, as its monetary policy has remained extremely dovish for more than a decade.

Meanwhile, the Pound Sterling awaits fresh guidance on interest rates. The United Kingdom's economic calendar remained light this week. Going forward, investors will focus on the labor market data for three months ending in January, which will be published early next week. Investors will keenly focus on the Average Earnings data, which will provide a fresh outlook on inflation.

The UK’s wage growth has remained almost double what is required to be consistent with the return of inflation to 2%. Strong wage growth momentum would dampen market expectations for rate cuts, which could result in higher investment in the Pound Sterling.

• Decreasing RSI on the daily chart, along with rising MACD red bars, signal an increase in selling pressure.
• On the hourly chart, there are signs of a steady positive momentum.

On Thursday, the GBP/JPY pair declined to 189.58, recording a 0.27% loss. It's noted a somewhat subdued bullish drive, with bears starting to gain ground. The negative tone is more clear on the daily chart while on the hourly chart buyers remain resilient.

On the daily chart, the GBP/JPY's Relative Strength Index (RSI) has been hovering in the positive terrain, with a decline in the latest reading, suggesting a moderation in buying pressure. Moreover, the Moving Average Convergence Divergence (MACD) also indicates a dampened bullish sentiment, as the red bars are on the rise.

GBP/JPY daily chart

Turning to the hourly chart, the RSI similarly operates within the positive zone, trending flat in its last readings. The MACD histogram, however, reflects decreasing positive momentum, as it prints declining green bars.

GBP/JPY hourly chart

Altogether, the chart seems to be pointing to weakening bullish traction and a resurgence of the bears. However, given that the pair is above the 20,100 and 200-day Simple Moving Averages (SMAs) the overall trend remains bullish.

• GBP/JPY extends its downward trajectory, declining by approximately 0.90% on Thursday.
• BoJ Governor Ueda emphasized the possibility of pursuing an exit from stimulus measures while achieving the 2% inflation target.
• UK Chancellor of the Exchequer Jeremy Hunt mentioned the BoE's commitment to keeping rates high to curb inflation.

GBP/JPY plunges to near 188.40 during the European session on Thursday, extending its losing streak for the third day. The hawkish comments from the Bank of Japan’s (BoJ) officials reinforced the Japanese Yen (JPY), which in turn, undermines the GBP/JPY cross.

Bank of Japan (BoJ) Governor Kazuo Ueda stated on Thursday that it is "fully possible to seek an exit from stimulus while striving to achieve the 2% inflation target." He emphasized considering rolling back the massive stimulus program once a positive cycle of wages and inflation is confirmed. The extent of rate hikes would be determined by the situation at the time if negative rates are lifted.

Additionally, Bank of Japan (BoJ) policy board member Junko Nakagawa shared his perspective on the Japanese inflation and economic outlook. He mentioned that the prospects of sustainably achieving the 2% inflation target are gradually increasing. Nakagawa emphasized the need to scrutinize whether and for how long data should be analyzed in deciding a policy shift. He also clarified that there is no preset idea on whether to end Yield Curve Control (YCC) in tandem with the exit from negative rates.

On Wednesday, UK Chancellor of the Exchequer Jeremy Hunt presented the Spring Budget to Parliament. The Pound Sterling (GBP) likely gained from positive sentiment surrounding the United Kingdom’s (UK) budget, especially as the Office for Budget Responsibility (OBR) projects stronger economic growth. According to the OBR, the UK economy is expected to grow by 0.8% in 2024 and 1.9% in 2025, surpassing the growth rates forecasted in November of 0.7% and 1.4%, respectively.

Hunt's acknowledgment of the challenges confronting the UK economy, such as the financial crisis, the pandemic, and the energy crisis stemming from the conflict in Europe, likely influenced market sentiment. His mention of the central bank's commitment to keeping interest rates high to address inflation concerns may have provided support for the British Pound (GBP). As a result, the GBP/JPY cross might have experienced a slowdown in its losses.

• GBP/JPY depreciates on news about BoJ to lift negative interest rates in March’s meeting.
• UK Chancellor Jeremy Hunt is anticipated to announce a reduction in national insurance contributions.
• Traders will observe the S&P Global/CIPS Construction PMI for February on Wednesday.

GBP/JPY depreciates to near 190.10 during the early European hours on Wednesday. The Japanese Yen (JPY) received a boost after reports from Jiji Press suggested that some attendees of the upcoming Bank of Japan (BoJ) policy meeting on March 19 may advocate for "lifting negative interest rates," which undermines the GBP/JPY cross.

BoJ Governor Kazuo Ueda has expressed skepticism about the sustainability of Japanese inflation reaching the 2% target. With the unexpected possibility of a recession, the BoJ may delay its plans for monetary policy tightening. According to Reuters, an unnamed source indicates that the BoJ is likely to maintain its forecast for a moderate economic recovery but may revise its assessment of consumption and factory output at the March meeting.

The release of data on Tuesday indicated a rebound in the Tokyo Consumer Price Index (CPI) from a 22-month low in February. This development has reignited discussions about the possibility of the Bank of Japan (BoJ) exiting the negative interest rates regime, which in turn has provided a boost to the Japanese Yen.

The Pound Sterling (GBP) strengthens in anticipation of the UK Chancellor Jeremy Hunt's Budget Report scheduled for Wednesday. Hunt is expected to present the government's fiscal agenda, detailing tax and spending plans. There is speculation that he may announce a reduction in national insurance contributions for employees, similar to the 2p reduction announced in the autumn statement.

UK’s BRC Like-For-Like Retail Sales (YoY) for February disappointed, registering a figure of 1.0%, below the anticipated 1.6%. This contrasts with the previous period's 1.4%. Later today, the S&P Global/CIPS Construction PMI for February will be observed by traders to gain insights into the UK's economic activity.

• GBP/JPY continues to deflate, falling sharply on Thursday.
• Japanese Retail Sales came in as expected, with revisions.
• Japan’s Unemployment Rate to wrap up the trading week.

GBP/JPY fell back towards the 189.00 handle on Thursday after Yen (JPY) markets stepped higher following a Japanese Retail Sales print that came in at expectations, and previous data saw mixed revisions. UK data remains thin on the economic calendar this week, and Yen traders will be looking ahead to next Tuesday’s Japanese Tokyo Consumer Price Index (CPI).

Japan’s Retail Sales came in at 2.3% for the year ended in January, meeting market forecasts while the previous period saw an upside revision from 2.1% to 2.4%. The MoM figure also recovered to 0.8% after the previous month saw a sharp downside revision to -2.6% from -0.8%.

Japanese Industrial Production in January also declined to -7.5%, missing the -7.3% forecast and falling back from the previous print of 1.4%.

Next up for economic calendar watchers will be Japan’s Unemployment Rate due early Friday, which is forecast to hold steady at 2.4%. Japanese preliminary inflation from the Tokyo CPI is slated for next Tuesday.

GBP/JPY technical outlook

GBP/JPY is down eight-tenths of one percent on Thursday as the pair grinds back towards the 189.00 handle. The pair has slid from the week’s early high near 191.30. GBP/JPY is trading back into a heavy supply zone built around 189.00.

Despite near-term weakness, the pair is buried deep in bull country, with daily candles trading well above the 200-day Simple Moving Average (SMA) at 183.43.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY meets with aggressive supply and dives to over a one-week low on Thursday.
• Intervention threats, along with hawkish BoJ talks, provide a strong boost to the JPY.
• A softer risk tone further benefits the safe-haven JPY and contributes to the downfall.

The GBP/JPY cross comes under intense selling pressure on Thursday and retreats further from its highest level since August 2015, around the 191.30 area touched earlier this week. Spot prices dive to over a one-week low during the first half of the European session, though manage to rebound a few pips in the last hour and currently trade around the 189.65-189.70 region, still down nearly 0.60% for the day.

A fresh intervention warning by Japan's vice finance minister for international affairs Masato Kanda and the Bank of Japan (BoJ) board member Hajime Takata's hawkish remarks provide a strong boost to the Japanese Yen (JPY), which, in turn, prompts aggressive selling around the GBP/JPY cross. In fact, Kanda reiterated that the government stands ready to take appropriate action against excessive exchange-rate moves and volatility.

Separately, Takata said that achievement of the 2% inflation target is becoming in sight and that the central bank must consider taking a nimble and flexible approach towards an exit from ultra-loose monetary policy. Apart from this, a slight deterioration in the global risk sentiment – as depicted by the prevalent cautious mood around the equity markets – turns out to be another factor benefiting the JPY's relative safe-haven status.

The British Pound (GBP), on the other hand, is undermined by firming expectations that the Bank of England (BoE ) will start cutting interest rates soon. This further contributes to the GBP/JPY pair's steep intraday decline to the 189.35 zone. Meanwhile, policymakers have been trying to push back against market expectations for early interest rate cuts, which, in turn, lends some support to spot prices and helps limit further losses.

In fact, BoE Deputy Governor Dave Ramsden said on Tuesday that he wants more evidence that inflationary pressures were easing to consider a cut in interest rates. Adding to this, BoE's Catherine Mann said on Wednesday that the spending habits of wealthy Britons make it harder to curb inflation. This, in turn, warrants some caution before confirming that the GBP/JPY cross has topped out and positioning for deeper losses.

• GBP/JPY gauges an intermediate cushion near 190.40 as the BoE sees no rush for rate cuts.
• UK’s high wage growth and service inflation keep the inflation outlook stubborn.
• Japan’s National CPI remains higher at 2% than expectations.

The GBP/JPY pair discovers a temporary cushion near 190.40 in Wednesday’s European session. The asset remains broadly upbeat as the Bank of England (BoE) is not ready for imminent rate cuts due to a stubborn inflation outlook.

BoE policymakers want to see more evidence to gain confidence that inflation will sustainably return to the 2% target to begin reducing interest rates.

On Tuesday, BoE Deputy Governor Dave Ramsden, who voted for holding interest rates at 5.25% in the last monetary policy meeting, said he wants to see how long inflation will remain persistent. Ramsden added the duration of inflation remaining persistent will determine how long interest rates will be maintained at 5.25%.

This week, the British Retail Consortium (BRC) reported that the annual shop price inflation retreated to 2.5% in February, the lowest since March 2022, which seems to offer some relief to households. However, strong wage growth and high service inflation continue to keep the outlook of consumer price inflation sticky.

The United Kingdom’s economic calendar is light this week. Therefore, the Pound Sterling will be guided by market expectations for rate cuts by the BoE.

Meanwhile, the Japanese Yen finds some buying interest as Japan’s inflation remains more stubborn than expectations in January. The annual National Consumer Price Index (CPI) rises by 2.0% against expectations of 1.8% but decelerates from December’s reading of 2.3%.

• The GBP/JPY currently trades at 190.86 marking a 0.12% loss in Tuesday's session.
• Daily RSI and MACD indicate a slight reduction in buyer's strength, hinting at a potential phase of consolidation.
• Despite some short-term negativity, the GBP/JPY's placement above primary SMAs indicates a bullish broader outlook.
• Fundamentals were on Yen's side, as it was the top performer in Tuesday's session.

The GBP/JPY pair is currently trading at the 190.86 level in Tuesday's session, with a modest decrease. However, the downside movements seem to not threaten the clear bullish trend seen in the broader timeframe.

On the daily chart, beginning with the Relative Strength Index (RSI), it has shown a slight reduction in strength from overbought territory but remains in the positive region. This suggests that while buyers have dominated recent trading, their control is slightly slipping, indicating a potential consolidation or retraction stage. Furthermore, the Moving Average Convergence Divergence (MACD) histogram's decreasing green bars, show that the upward momentum is losing strength as well.

GBP/JPY daily chart

On the hourly chart, the RSI fell to negative territory, indicating that the sellers have been dominating recent trades on the hourly timeframe. This is further substantiated by the MACD histogram's flat green bars, indicating that short-term buying momentum has stalled.

GBP/JPY hourly chart

In conclusion, the daily and hourly charts show discrepancies with the daily chart indicating a continuing, though weakened, buying momentum. On the other hand, the hourly chart indicates the dominance of sellers. This divergence between the two charts signals potential upcoming volatility in the GBP/JPY pair. However, in case the pair holds above its main SMAs, the outlook will still be positive.

• GBP/JPY corrects from a multi-year peak in reaction to slightly hotter CPI from Japan.
• The slide might still be categorized as profit-taking amid slightly overbought conditions.
• The fundamental backdrop warrants some caution before placing aggressive bearish bets.

The GBP/JPY cross comes under some selling pressure on Tuesday and snaps a five-day winning streak to its highest level since August 2015, near the 191.30 region touched the previous day. Spot prices remain depressed through the mid-European session and currently trade around mid-190.00s, just above the overnight swing low.

Inflation in Japan eased slightly less than expected in January and intensified speculations around the Bank of Japan's (BoJ) move to abandon its negative interest rate policy. This, along with expectations that the Japanese government will intervene to prop up the domestic currency, provides a goodish lift to the Japanese Yen (JPY) and turns out to be a key factor that prompts some profit-taking around the GBP/JPY cross.

Apart from this, the British Pound's (GBP) relative underperformance against its Japanese counterpart could also be attributed to bets that the Bank of England (BoE) will start cutting interest rates soon. The expectations were bolstered by softer UK consumer inflation figures released last week. That said, the prevalent US Dollar (USD) selling bias is seen benefitting the GBP, which, in turn, might limit losses for the GBP/JPY cross.

Meanwhile, the aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling to confirm that the GBP/JPY cross has topped out in the near-term and before positioning for any meaningful corrective slide. That said, oscillators on the daily chart remain close to overbought territory and might prompt some long-unwinding trade, supporting prospects for additional intraday losses.

• GBP/JPY edges lower on the release of Japanese CPI data on Tuesday.
• Pound Sterling received upward support on speculation regarding a delay in BoE’s rate cuts
• Japan’s CPI (YoY) grew by 2.2% against the previous growth of 2.6%.

GBP/JPY halts its winning streak that began on February 20, edging lower to near 190.80 during the Asian session on Tuesday. However, speculation arose regarding a potential delay in rate cuts following a testimony to the UK Treasury Committee by Bank of England (BoE) Governor Andrew Bailey and other policymakers last week. Bailey mentioned that while he wouldn't forecast the exact number of cuts, the bank was moving towards a path of lowering rates. This speculation has lifted the Pound Sterling (GBP) against the Japanese Yen (JPY).

Governor Bailey also emphasized that the Bank of England has transitioned from a focus on determining the tightness of policy and the necessary height of rates to considering how long the central bank needs to maintain this stance to achieve sustained inflation. Following the BoE's decision earlier this month to keep the interest rate steady at 5.25%, the markets have factored in expectations for four rate cuts by the end of the year.

However, the Japanese Yen (JPY) managed to draw in some buyers. Japanese consumer inflation data renewed expectations for a potential adjustment in the Bank of Japan's (BoJ) policy stance, leading investors to exercise caution. Additionally, recent verbal intervention by Japanese authorities may offer some support for the JPY.

In January, Japan’s National Consumer Price Index (CPI) grew by 2.2% year-over-year, slightly lower than the previous growth of 2.6%. Additionally, Core CPI (YoY) increased by 3.5%, down from the previous 3.7%. Traders are now eagerly awaiting Retail Trade data to gain further insights into the Japanese economic landscape.

• GBP/JPY bull run takes the pair into its highest bids since 2015.
• Technical ceiling parked near 196.00 at June 2015 high.
• Japan National CPI due early Tuesday, expected to ease further.

GBP/JPY is up over 6% YTD in 2024 as the pair continues to climb into multi-year highs, and has reached its highest bids since August of 2015 just above the 191.00 handle.

This week sees a smattering of UK economic data on the calendar, but is strictly low-tier. Japan’s National Consumer Price Index (CPI) inflation figures are due early Tuesday, with Japanese Retail Trade numbers slated for Thursday.

Japan’s National CPI for the year ended in January is broadly expected to reiterate the findings from the Tokyo CPI advance print as Japanese inflation continues to cool. Core National CPI is forecast to recede to 1.8% YoY from the previous period’s 2.3%.

Early Thursday’s Japan Retail Trade is expected to rebound to 2.3% YoY compared to the previous 2.1%, but January’s Industrial Production is expected to decline sharply by 7.4% compared to the previous month’s 1.4% increase.

GBP/JPY is on fast approach to 2015’s peak bids near 196.00, with prices above the 200.00 major price level waiting beyond. GBP/JPY has not traded above 200.00 since 2008.

GBP/JPY technical outlook

GBP/JPY is up over 3% from February’s bottom bids at 185.23, and the pair is drifting into multi-year peaks that leave the Guppy with few technical barriers as the march up the charts continues.

A near-term supply zone is marked out between 190.50 and the 190.00 handle, and 190.00 remains a key technical barrier after previously capping intraday chart action following February’s earlier rejection from the key level.

GBP/JPY has surged in 2024, climbing from January’s early bottom at 178.74, catching a bullish rebound from the 200-day Simple Moving Average (SMA) in the process, which is currently rising through the 183.00 handle.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY eyes stabilization above 191.00 as hopes for BoJ’s pivot to exit a dovish stance wane.
• Japan’s National CPI data will influence market expectations for BoJ’s interest rates.
• UK’s high wage growth is offsetting downside pressures on inflation BoE’s higher interest rates.

The GBP/JPY pair oscillates near a historic high of 191.00 in the London session on Monday. The pair aims to extend more upside as uncertainty over the Bank of Japan’s (BoJ) plans of exiting the decade-long dovish monetary policy stance is waning.

The Japanese economy remains in a technical recession in the second half of 2023, which is an unfavorable condition for the BoJ to consider a shift to a restrictive stance. The economy needs heavy monetary stimulus to achieve an uptick in the coming quarters.

Meanwhile, investors await the National Consumer Price Index (CPI) data for January, which will be published on Tuesday. Investors anticipate that annual CPI excluding fresh foods would fall below 1.8% from 2.3% in December. This would indicate that the BoJ is struggling to maintain the underlying inflation above the 2% target. Eventually, this will undermine the plans of exiting the expansionary policy stance.

On the United Kingdom front, higher wage growth and service inflation continue to be painful for the economy. The wage growth in the UK economy is increasing at a pace double what is required to be consistent with bringing down inflation to the 2% target. This is forcing the Bank of England (BoE) to delay rate cuts aggressively as it could flare up price pressures again

Meanwhile, investors await fresh guidance from BoE policymakers on the timing of rate cuts.

On the economic data front, UK’s recruitment data company Adzuna showed that job postings by British employers hit significantly in January. "January 2024 has proven to be one of the most difficult starts to the year for job hunters in recent years with companies continuing to put hiring plans on ice," Adzuna co-founder Andrew Hunter said.

• GBP/JPY could extend gains due to diminished expectations regarding the BoJ exiting from negative interest rates.
• The safe-haven Japanese Yen could face challenges due to the surge in the global money markets.
• UK PMI data showed a slight improvement in domestic business activity in the private sector.

GBP/JPY remains around 190.60 during the Asian session on Friday, exhibiting a positive bias to extend its winning streak for the fourth consecutive day. Concerns about a potential recession in Japan may delay the Bank of Japan's (BoJ) plan to exit from negative interest rates in the near term.

Moreover, the surge in global money markets, as investors digest the dashed hopes for interest rate cuts by major central banks worldwide, is weighing on the safe-haven Japanese Yen (JPY). However, the JPY may find some support from recent verbal intervention by Japanese authorities.

Earlier in the week, the Japanese Yen gained support from better-than-expected Trade Balance figures released by the Ministry of Finance of Japan, thereby limiting losses for the GBP/JPY cross. Additionally, market participants are awaiting Japan’s National Consumer Price Index (CPI) data scheduled for release on Tuesday.

The Pound Sterling (GBP) received upward support from mixed Purchasing Managers Index (PMI) data for February from the United Kingdom (UK). While the preliminary Manufacturing PMI for February came in at 47.1, slightly below market expectations of 47.5, the Services PMI remained unchanged at 54.3, surpassing the consensus of 54.1. The Composite PMI arrived at 53.3, exceeding expectations of remaining consistent at 52.9.

Uncertainty prevails among investors regarding the trajectory of policy rates by the Bank of England (BoE), particularly following remarks from BoE officials. BoE Governor Andrew Bailey, in an address to the United Kingdom Parliament on Tuesday, noted the rapid decrease in UK inflation. He emphasized that the central bank does not require a definitive return of inflation to target levels before considering interest rate cuts.

Furthermore, on Wednesday, Swati Dhingra, a member of the Bank of England, suggested that delaying interest rate cuts could lead to increased living costs and potentially result in a harsh economic downturn for the United Kingdom.

• GBP/JPY tested into the high end as the Yen recedes.
• UK Public Sector Net Borrowing declined sharply in January.
• UK PMIs due in Thursday, markets expected a mixed steady print.

GBP/JPY rotated on Wednesday, marking in a slight new high for the week as the Pound Sterling (GBP) gets a leg up from a broad-market pullback in the Japanese Yen (JPY). Bank of England (BoE) policymaker Swati Dhingra noted on Wednesday that the outlook for UK inflation remains bumpy, but downwards, noting that UK consumption still remains below pre-pandemic levels as the UK lags behind its developed economy cohorts in Europe and the US.

UK Public Sector Net Borrowing, which tracks the UK government’s budget surplus or deficit, tumbled to its lowest print in at least fifteen years, showing a net decline of £-17.615 billion, far below the forecast £18.4 billion. The figure fell back from the previous MoM print of £6.451 billion, though the National Statistics office tracking of the UK’s federal budget is prone to revisions as time goes on.

Thursday brings the UK’s latest Purchasing Manager’s Index (PMI) figures for February, and markets are expecting the UK S&P Global/CIPS Services PMI to tick down to 54.1 from 54.3 MoM. The Manufacturing PMI component is forecast to see a slight improvement to 47.5 from 47.0, and the Composite UK PMI is expected to hold steady at 52.9.

February’s GfK Consumer Confidence slated for Friday is expected to see a slight improvement to -18.0 from -19.0 to round out the trading week, and Japan will be out for Thursday as the country celebrates Japanese Emperor Naruhito’s birthday.

GBP/JPY technical outlook

The Guppy continues to drift into the high end with the pair sticking close to its highest bids since 2015. The GBP/JPY continues to be bolstered by the 200-hour Simple Moving Average (SMA) near 189.00 in the near-term, and momentum is holding firmly in the bullish side despite slowing gains on the chart.

The GBP/JPY continues to test into the 190.00 major handle, and the pair sees firm technical support after rebounding from the 200-day SMA below 182.00 in early 2024. The pair remains up around 6% from December’s choppy swing low into 178.00.

GBP/JPY hourly chart

GBP/JPY daily chart