GBP/JPY rebounds from 190.00 on upbeat UK Manufacturing PMI

• GBP/JPY revives from 190.00 as UK Manufacturing PMI returns to expansion.
• UK’s soft shop price inflation boosts BoE rate cut expectations.
• The expectations for Japan’s intervention to support the Japanese Yen have deepened.

The GBP/JPY pair discovers buying interest near the crucial support of 190.00. The cross finds support as the S&P Global/CIPS has reported that the United Kingdom Manufacturing PMI has returned to expansion after contracting for more than a year.

The UK Manufacturing PMI landed above the 50.0 threshold, which separates the expansion from contraction, at 50.3. The factory data was higher than expectations and the prior reading of 49.9.

Rob Dobson, Director at S&P Global Market Intelligence, said: “The end of the first quarter saw UK manufacturing recover from its recent doldrums. Production and new orders returned to growth, albeit only hesitantly, following yearlong downturns, with the main thrust of the expansion coming from stronger domestic demand.

The robust recovery in the UK Manufacturing PMI indicates a revival in household spending, fueled by growing expectations that the Bank of England (BoE) will start reducing interest rates sooner due to easing inflation.

In Tuesday’s Asian session, the British Retail Consortium (BRC) showed that shop price inflation grew by 1.3% in March, at the slowest pace in more than two years, due to softening prices of food and non-food items. This has increased expectations for the BoE to unwind its historically tight interest rate stance.

On the Japanese Yen front, uncertainty over the Bank of Japan’s (BoJ) interest rate outlook could push the Japanese Yen on the back foot. The BoJ is expected to adopt a cautious approach to further policy tightening due to the absence of concrete evidence for the wage growth spiral.

Meanwhile, speculation about Japan’s stealth intervention in the FX domain keeps the downside in the Japanese Yen limited. Japan's Finance Minister Shunichi Suzuki reiterated his warning about the recent rapid JPY moves on Monday, saying he would respond appropriately and would not rule out options against excessive volatility.