The Pound climbs against the Japanese Yen as the BoJ gives no hike signal

GBP/JPY climbs to 210.00 as the BoJ gives no October hike signal.
The UK's Bank Rate pays 2.50 points more than the BoJ's 1.25%.
GBP/JPY has held roughly between 207.00 and 211.50 since early September.

Joshua Gibson FXStreet

210.00 has capped GBP/JPY three times since September 24, give or take a few pips, the latest on Tuesday. The cross trades just under it, in the upper part of a band that has contained it since early September.

The Pound gained as Treasury yields eased, while the Yen stayed flat because the Bank of Japan (BoJ) offered no fresh signal on October. BoJ Governor Ueda said the bank intends to keep lifting rates, which futures have translated as later rather than sooner.

The BoE and the BoJ could both hike this autumn and leave the gap unchanged

The UK's Bank Rate is 3.75% and the BoJ's rate is 1.25%, so holding Pounds instead of Yen earns 2.50 points a year before any move in the exchange rate. Futures price a Bank of England (BoE) hike on November 5 as likely and an October BoJ hike as unlikely, which points to a wider gap by mid-November. The gap is exactly twice the BoJ's whole rate.

Tokyo's Yen buying is aimed at the Dollar and lands on the Pound as well

Japan started buying Yen on July 30 with USD/JPY just under 164.00, and GBP/JPY traded through a range of more than 6.00 that day. That single session covered more ground than the cross has since early September. USD/JPY trades about six yen below that level, so the cross is a long way from the last trigger but not from the next warning.

Japan's August pay data is due at 23:30 GMT on Tuesday, and BoE Deputy Governor Lombardelli speaks on Thursday at 13:00 GMT, the two scheduled events on either side of the cross. A slower Japanese pay figure and a firmer Lombardelli would both point the same way, toward a wider gap.

Levels at the top of GBP/JPY's range

Resistance: 210.00 has capped three sessions since September 24, including Tuesday. Above it, the September 18 spike topped out just above 211.00, and the 200-day Exponential Moving Average (EMA) sits near 211.50.

Support: Tuesday's low, just above 208.50, is the first floor. 207.00 is the base of the range, with the September 30 low just under it.

Bias: Buyers hold the edge above 208.50 on a daily closing basis, aiming at 211.00 and then 211.50. The daily Stochastic Relative Strength Index (Stoch RSI) is near 77 and still rising, so a pause at 210.00 before a break would fit the call. A daily close below 207.50 ends it.

GBP/JPY daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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