GBP/JPY senses selling pressure from 172.00, BOE policy grabs attention

• GBP/JPY has dropped sharply from 172.00 amid mixed responses from risk impulse.
• Upbeat Japan’s Retail Sales data has strengthened yen.
• The BOE may hike its interest rates by 75 bps to 3%.

The GBP/JPY pair has witnessed a steep fall after failing to sustain above 172.00 in the European session. The cross sensed selling pressure after Japan’s Bureau of Statistics reported a significant increase in Retail Sales data.

Meanwhile, the market impulse is delivering mixed responses as anxiety among the market participants is accelerating ahead of the monetary policies by the Bank of England (BOE), the Federal Reserve (Fed), and the Reserve Bank of Australia (RBA).

The release of the upbeat Retail Sales data has strengthened yen. The monthly and annual Retail Trade have accelerated to 1.1% and 4.5% vs. the projections of 0.6% and 4.1% respectively. The Larger Retail Sales have soared to 4.1% against the estimates of 3.6%. Apart from that, annual Industrial Production has climbed to 9.8% in comparison to the consensus of 8.7%.

On the UK front, investors are awaiting Thursday’s interest rate decision by the BOE. Analysts at Rabobank see a 75 bps rate hike to 3.00% from 2.25%.  Earlier, analysts were expecting a rate hike of a full percent after the disaster of the mini-budget under the leadership of former UK PM Liz Truss and Chancellor Kwasi Kwarteng. However, novel leadership formation has infused optimism in scaled-down rate hike projections. They explain that it would still be the largest rate hike of this cycle. On policy guidance, analysts expect rates to peak at 4.75%.

Meanwhile, minutes from Llyods Bank PLC’s business barometer claim that business confidence has dropped to pre-pandemic levels. The UK Consumer Confidence fell 1 point to 15% in the October survey, as reported by Bloomberg. However, the majority of employers are expecting that staff will increase for the first time in five months.