GBP/JPY faces resistance around 158.00 amid weaker UK GDP forecasts

• GBP/JPY has witnessed selling pressure after a less-confident pullback to near 158.00.
• The BoJ made a stealth intervention to provide a cushion to the Japanese Yen.
• UK NIESR has cut its GDP forecasts and sees households in severe pain due to the higher cost of living.

The GBP/JPY pair has sensed selling interest while attempting to extend recovery above the critical resistance of 158.00 in the Asian session. The less-confident pullback move by the Pound Sterling has been punished and the downside journey for the cross has resumed.

On Tuesday, the cross was heavily dumped by the market participant. Also, Bank of Japan’ (BoJ) officials confirmed a stealth intervention, a move to provide support to the Japanese Yen.

Meanwhile, the street has started delivering the impact of considering BoJ Deputy Governor Masayoshi Amamiya as a successor of BoJ Haruhiko Kuroda. Economists at OCBC analyzed how each contender for BoJ’s novel leadership will impact the Japanese Yen.

A note from OCBC states “Focus this week will be on the list of BoJ nominees that is likely to be presented to parliament on 10 February though there are reports suggesting a delay to next week. Amamiya’s appointment would be most supportive of the Japanese Yen upside while Yamaguchi’s appointment could weigh down Yen’s strength.

On the United Kingdom front, the Bank of England (BoE) has failed till now in softening inflationary pressures significantly despite being the early adopter of restrictive monetary policy after the pandemic period and pushing interest rates to 4%. The impact of a higher cost of living is making the life of households miserable as they are unable to address their essential expenses.

A report from Britain's National Institute for Economic and Social Research (NIESR) dictates “One in four British households would be unable to pay for food and energy without using up savings, borrowing or seeking other help in the 2023/24 financial year, up from one in five during the current year,” as reported by Reuters.

The agency has cut its Gross Domestic Product (GDP) forecasts to 0.2% from 0.7% forecasted earlier and sees growth of 1.0% in 2024, down from 1.7%. Higher interest rates by  BoE Governor Andrew Bailey in achieving price stability has dented the scale of economic activities.