- The GBP/JPY fell to a low of 182.14, seeing more than a 0.50% loss on the day, then stabilising near 182.55.
- British yields fell sharply, weakening the Sterling Pound after Gov. Bailey’s speech at the ECB forum.
- Kazuo Ueda kept his dovish tone, worrying about inflation being below the BoJ’s target.
The GBP/JPY finally corrected downwards after five consecutive days of gains, with a loss of over 0.50% on the day, as falling British yields dampened the appeal of the British pound. Despite the correction, the Japanese Yen remains vulnerable as Kazuo Ueda maintains a dovish stance, expressing concerns about inflation falling below the Bank of Japan's target—eyes on inflation data from Japan at the early Friday Asian session.
British gilts weakened somewhat after Bailey’s speech
On Wednesday, Governor Andrew Bailey from the Bank of England (BoE) stated that “they are not nearly done” regarding monetary policy as he showed concerns about core inflation being “much stickier” than headline inflation, which he expects to come down markedly in 2023.
In the meantime, the British bond yields are declining and show that investors are seeing a negative outlook on the UK’s economy, and they signal a higher demand for bonds. In that sense, the 2,5 and 10-year yields declined more than 1% falling to 5.13%, 4.55% and 4.30%.
Contrarily, Kazuo Ueda continued to express a dovish perspective by affirming that "underlying inflation remains below the targeted level." He further indicated that a potential policy adjustment would be considered when inflationary pressures align with the Bank of Japan's forecasts. In that sense, inflation figures as per the Tokyo Consumer Price Index (CPI) from June, to be released early Friday, will affect the JPY price dynamics. As for now, investors foresee an acceleration of the headline figure to 3.8% YoY and the Core measure to 4.4%.
GBP/JPY Levels to watch
According to the daily chart, despite the downward correction, the bullish outlook for the cross is still intact. However, the Relative Strength Index (RSI) is still in overbought territory, suggesting that the additional downward movements shouldn’t be removed.
Support levels to watch: 181.80,181.00, 180.00
Resistances levels to watch: 183.00,183.50,184.00
GBP/JPY Daily chart
-638235817861198951.png)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD appreciates as US Dollar remains subdued after a softer inflation report
The Australian Dollar steadies following two days of gains on Monday as the US Dollar remains subdued following the Personal Consumption Expenditures Price Index data from the United States released on Friday.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Gold price bulls seem non-committed around $2,620 amid mixed cues
Gold price struggles to capitalize on last week's goodish bounce from a one-month low and oscillates in a range during the Asian session on Monday. Geopolitical risks and trade war fears support the safe-haven XAU/USD. Meanwhile, the Fed's hawkish shift acts as a tailwind for the elevated US bond yields and a bullish USD, capping the non-yielding yellow metal.
Week ahead: No festive cheer for the markets after hawkish Fed
US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.