GBP/JPY declines towards 164.00 on weaker-than-expected UK Retail Sales

• GBP/JPY is scaling lower towards 164.00 as UK Retail Sales have contracted by 5.4% vs. 4.2% expected.
• The synergic effect of weaker Retail Sales and skyrocketing inflation will weigh extreme pressure on the BOE.
• Investors are awaiting more developments on BOJ’s intervention plans.

The GBP/JPY pair has sensed selling pressure around 164.40 after the release of downbeat UK Retail Sales data. The asset is declining towards the critical support of 164.00. The UK Retail Sales have contracted by 5.4% vs. 4.2% contraction expected and have remained extremely lower than the prior decline of 3.2% on an annual basis. Also, the annual Retail Sales data that excludes fuel bills has released extremely lower at -5%.

The downbeat Retail Sales data will couple with the inflation monster. The synergic impact will be huge as inflationary pressures are near double-digit figures and energy prices are still not finding resistance. Next week, the interest rate decision by the BOE will be keenly watched. It is worth noting that the BOE has already elevated its interest rates to 1.75% and a further rate hike by 50 basis points (bps) is expected, a poll from Reuters.

Recently announced stimulus packages by new Prime Minister Liz Truss to corner energy bills for households and reduce taxes to support the latter with more funds for catering to the higher payouts. The move will delight the households but will create more issues for the BOE as injecting helicopter money into the economy in times when inflation problems are parallel for a tad longer period.

On the Tokyo front, the depreciating yen has now become a headache for the Bank of Japan (BOJ) and its economy. The nation was enjoying a weaker currency as it was accelerating exports and the tourism industry and companies are facing the heat of currency risk due to costly imported inputs. The BOJ has already shown its intentions of intervening in the Fx moves as it believes that the current price doesn’t justify the fundamentals.