GBP/JPY rallies to near 183.00 as odds of BoJ’s stealth intervention fades

• GBP/JPY jumps swiftly to 183.00 as expectations of BoJ’s intervention in FX fade.
• Naoyuki Shinohara said that Japanese authorities could not reverse the tide against the Yen backed by easy policy.
• BoE Mann warned about higher inflation and rising consumer inflation expectations.

The GBP/JPY pair drives vertically to near the crucial resistance of 183.00 as the odds of a possible intervention by the Bank of Japan (BoJ) in the FX domain fade. Former top currency diplomat Naoyuki Shinohara said this weekend that the recent fall in the Japanese Yen is reflecting the economic fundamentals of Japan, which would refrain top diplomats from a stealth intervention.

Naoyuki Shinohara said that there is no set of rules that could define what kind of moves should be considered as ‘excess volatility’ and usually the timeframe for excess volatility should be some days or weeks not months. The tide against the Japanese Yen on the back of expansionary monetary policy for a prolonged period cannot be reversed by Japanese authorities.

Contrary, top currency diplomat Masato Kanda said last week that steady yen falls over a protracted period could also warrant intervention, as reported by Reuters.

The Pound Sterling strengthened as the Bank of England (BoE) policymaker Katherine Mann warned about higher inflation and rising consumer inflation expectations. She further added that central bankers should adopt an aggressive policy-tightening approach to bring down inflation to 2% in a timely manner.

Going forward, UK factory activity data will be keenly watched. Investors see monthly Manufacturing Production contracting by 0.3% against the 0.8% contraction recorded for July. Monthly Industrial Production is foreseen to decline at a slower pace of 0.2% against a contraction of 0.7% in July. The monthly Gross Domestic Product (GDP) is seen expanding by 0.2% against a decline y 0.5%, recorded for July.