GBP/JPY steadies above 159.00 as UK Q4 GDP matches market forecasts, yields retreat

• GBP/JPY clings to mild losses following UK data dump.
• Preliminary readings of UK Q4 GDP matches 0.0% market forecasts.
• Yield curve inversion renews recession woes but BoJ talks defend pair buyers.
• Concerns surrounding the next BoJ leadership, economic slowdown fears are the key to follow for fresh impulse.

GBP/JPY stays sidelined near 159.30-20, paying little heed to the UK’s fourth quarter (Q4) Gross Domestic Product (GDP) during early Friday. In doing so, the cross-currency pair portrays the market’s indecision amid mixed signals and cautious mood ahead of the key US inflation precursors.

That said, the first readings of the UK Q4 GDP match forecasts on QoQ and YoY figures while declining more for December month. However, the improvement in Industrial Production and Manufacturing Production seemed to have probed the pair buyers.

Also read: Breaking: UK Preliminary GDP stagnates in Q4 2022, as expected

Earlier in the day, various Bank of Japan (BoJ) officials tried pushing back the hawkish expectations for the Japanese central bank and put a floor under the GBP/JPY price. Recently, Bank of Japan (BoJ) Deputy Governor Masayoshi Amamiya said that (It is) appropriate to maintain the current ultra-loose monetary policy. Before that, BoJ Governor Haruhiko Kuroda said, “The benefits of easing outweigh the costs of side effects.”

On the contrary, a pullback in the Treasury bond yields after renewing the recession fears seems to weigh on the GBP/JPY price. That said, the widest negative difference between the US 10-year and 2-year Treasury bond yields since 1980 amplified the recession woes the previous day. The yield curve inversion remains around the same level as both these key bond yields stay depressed near 3.66% and 4.48% respectively by the press time.

Looking forward, the cautious mood ahead of the next BoJ leadership announcements, up for publishing on Monday, could restrict the GBP/JPY moves. However, the fears of recession and a retreat in yield may weigh on the prices amid downbeat UK concerns, including Brexit and workers’ strikes.

Technical analysis

A daily closing beyond the previous resistance line from January 27, now support around 158.70, keeps the GBP/JPY buyers directed towards the 50-DMA hurdle surrounding 161.20.