GBP/JPY continues to gain ground despite weak UK PMIs
|- The GBP/JPY traded in the 181.26 - 182.81 range, set to close its sixth weekly gain in a row.
- The Sterling seemed to get traction thanks to the hawkish BoE’s decision on Thursday despite weak PMIs.
- Soft Japanese inflation figures applied further pressure on the Yen.
On Friday, GBP/JPY continued to push the cross to fresh cycle highs at 182.80 after finding support at the 181.25 area. In that sense, the Sterling continued to gain ground on the back of Thursday’s Bank of England (BoE) hawkish surprise to raise rates by 50 basis points and held its ground despite weak British PMIs from June.
The Sterling maintains hawkish-BoE-momentum
British PMIs came in weak, the S&P Global showed that the Manufacturing PMI from the UK from May, dropped to 46.2 vs the 46.8 expected, while the Services PMI held in expansion territory, coming in at 53.7 but below the 54.8 expected.
Despite the weak economic data, the Sterling maintained the momentum gained on Thursday after the surprising 50 bps hike by the BoE. In that sense, the statement hinted at more rate hikes confirming that the bank will do “what’s necessary” in order to curve down inflation to 2%. Relating to PMIs, the Bank confirmed that it expects the British Gross Domestic (GDP) to flatten in Q2. However, Governor Andrew Bailey, in the presser, gave more emphasis to inflationary pressures as he stated that “they are still too high, and we have got to deal with it”.
On the other hand, soft inflation figures in Japan are adding pressure on the Yen. The National Consumer Price Index and Core Inflation for May were lower than expected suggesting that the BoJ will maintain its dovish stance. Looking forward, investors will pay close attention to Governors’ Ueda from the BoJ and Christine Lagarde from the ECBs’ speeches next Wednesday at the ECB Sintra Forum.
GBP/JPY Levels to watch
According to both the weekly and daily charts, the GBP/JPY holds a bullish outlook for the short term. In the latter, the positive outlook is more clear as investors tallied a sixth weekly gain, while on the daily chart, indicators are losing some steam.
Upcoming resistance for GBP/JPY is seen at the zone at the 183.00 level, followed by the 183.50 zone and the 184.00 area. On the other hand,the daily low at 181.20 level remains the nearest support for the cross, which if broken, will bring into play the 180.00 zone and 179.00 level.
GBP/JPY Daily chart
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