GBP/JPY trades inside Thursday’s range despite weak UK Retail Sales data

• GBP/JPY consolidates around 182.00 despite a sharp decline in the UK’s Retail Sales data.
• UK’s consumer spending contracted as elevated price pressures squeezed households’ real income.
• BoJ Ueda emphasized achieving a sustainable 2% inflation target by wage growth.

The GBP/JPY remains broadly sideways in a narrow range around 182.00 in the European session. The cross failed to find direction despite the United Kingdom Office for National Statistics (ONS) reporting a weak Retail Sales report for September.

The ONS reported that monthly Retail Sales contracted significantly by 0.9% while economists forecasted a nominal drop of 0.1%. In August the Retail Sales were expanded by 0.4%. Annual Retail Sales contracted at a slower pace of 1.0% against a 1.3% decline in August. The ONS held the higher cost of living pressures responsible for a sharp decline in sales at clothing stores and household goods.

The recent surge in energy prices due to supply chain disruptions has squeezed deep pockets of households. A sharp downtick in consumer spending has dented consumer inflation expectations. This would allow the Bank of England (BoE) to keep interest rates unchanged at 5.25% for one more time on November 2.

After Retail Sales data, investors shift focus to the employment data for August, which will be announced on Tuesday. As per the expectations, the laborforce saw a cut by 195K against a decline of 207K in July. The Unemployment Rate in the July-August period remained steady at 4.3%. Declining labor demand may dampen labor earnings outlook.

On the Japanese Yen front, Bank of Japan (BoJ) Governor Kazuo Ueda emphasized achieving a sustainable 2% inflation target by wage growth and the maintenance of ultra-loose monetary policy. Fears of potential intervention by the BoJ or Japan’s authority in the FX domain remain intact as the Japanese Yen has weakened to 150.00 against the US Dollar.