CFD Trading Rate Great Britain Pound vs Japanese Yen (GBPJPY)

• GBP/JPY edges lower to 191.00 following the UK GDP Q4 data on Thursday. 
• The UK GDP numbers contracted 0.3% QoQ and 0.2% YoY in Q4, as expected. 
• The speculation that the Bank of Japan (BoJ) will intervene in the FX market might lift the Japanese Yen against the Euro. 
• Investors will closely watch the Tokyo Consumer Price Index (CPI) for March, due on Friday. 

The GBP/JPY cross trades in negative territory for two straight days, hovering around the 191.00 mark on Thursday. The dovish remarks from the Bank of England (BoE) exert some selling pressure on the Pound Sterling (GBP). 

The latest data from the Office for National Statistics showed on Thursday that the UK Gross Domestic Product (GDP) for the fourth quarter (GDP) contracted 0.3% QoQ and 0.2% YoY in Q4. Both figures were in line with market expectations. The GBP remains weak following the UK GDP numbers as the markets raise their bet that the Bank of England (BoE) will begin three quarter-point reductions in rates this year. The BoE Governor Andrew Bailey said that interest rate cuts will be ‘in play’ at future BoE policy meetings.

On the other hand, the weakening of the Japanese Yen might be limited amid speculation that the Bank of Japan (BoJ) will intervene in the FX market to stop disorderly and speculative moves in the currency. Japan’s Chief Cabinet Secretary Yishimasa Hayashi stated on Thursday that he will closely watch the FX volatility and won’t rule out any steps against excessive moves. 

Moving on, market participants will keep an eye on the Tokyo Consumer Price Index (CPI) for March, Unemployment Rate, Industrial Production, and Retail Trade, due on Friday. If the Japanese CPI data shows softer-than-estimated, this could complicate the BoJ's interest rate hike path and weigh on the JPY. The UK market will be closed on the occasion of Good Friday. 

• GBP/JPY edges lower to 191.30 in Wednesday’s early European session. 
• Japanese Finance Minister came with some verbal intervention, which lift the Japanese Yen.
• The dovish stance from the BoJ might exert some pressure on the JPY. 
• Investors await the UK Q4 GDP growth numbers and Japan’s Tokyo Consumer Price Index (CPI), due later this week. 

The GBP/JPY cross trades on a weaker note near 191.30 during the early European session on Wednesday, snapping the two-day winning streak. The Japanese Yen (JPY) recovers some lost ground against its rivals after the verbal intervention from Japanese authorities early Wednesday. Nonetheless, the dovish remarks from the Bank of Japan (BoJ) policymaker to maintain accommodative monetary conditions might limit the JPY and cap the downside of the GBP/JPY cross in the near term.

Japanese Finance Minister Shunichi Suzuki stated on Wednesday that he will not rule out any actions including "decisive steps" to respond to any excessive moves in the foreign exchange. This, in turn, boost the JPY against the Pound Sterling (GBP) on Wednesday. Furthermore, the cautious mood in the market or uncertainties ahead of the Good Friday holiday might boost safe-haven flows and benefit the JPY for the time being.

On the other hand, the recent dovish comments from the BoJ policymaker to maintain accommodative monetary conditions might limit the JPY and cap the downside of the GBP/JPY cross. The BoJ governor Kazuo Ueda said on Wednesday that “based on our current economic and price projections, accommodative financial conditions are expected to continue for the time being.” 

On the GBP’s front, the Bank of England's (BoE) Catherine Mann, one of the BOE's most hawkish policymakers, said investors expect too many interest rate cuts this year. Money markets raise their bets on easing at its next monetary-policy decision, putting the chance of a rate cut at 20%.  

Traders will take more cues from UK GDP growth numbers on Thursday, which are projected to contract 0.3% QoQ in the fourth quarter. In the scenario of stronger-than-expected GDP growth numbers, the Pound Sterling (GBP) could gain momentum and act as a tailwind for the GBP/JPY pair. On Friday, the Tokyo Consumer Price Index (CPI) for March will be the highlight. 

• GBP/JPY finds support at the upper borderline of a Wedge it recently broke out from. 
• Bearish technical indicators suggest more downside is possible after the overextension. 

GBP/JPY has been rising in a bearish Wedge pattern. Recently the pair broke above the upper boundary line and then reversed lower. It has since found temporary support at the Wedge’s upper edge. A cursory glance at the tea leaves suggest a risk of further weakness despite the uptrend remaining intact. 

GBP/JPY formed a Two Bar reversal pattern on the daily chart (rectangled) at the March 20 and 21 highs. Such patterns are fairly reliable indicators of short-to-medium term reversals. 

Pound Sterling versus Japanese Yen: Daily chart

At the same time as price rolled over, the Relative Strength Index (RSI) exited its overbought zone, giving a sell signal (circled). 

In addition, when prices reach bullish extremes and overshoot trendlines the reversal that follows is often significant, suggesting GBP/JPY could be reversing a longer-term trend. 

A break below the last swing low of the up move, the 187.964 March 11 low, would provide stronger confirmation that the trend was turning bearish. 

Such a break would probably be followed by a move down inside the Wedge to a target at the lower boundary of the pattern, at roughly 180.400. 

Along the way fairly stubborn support is likely to be provided by the 100-day and 200-day SMAs at 186.610 and 184.730 respectively. 

A decisive break below the lower borderline of the Wedge would be very bearish and likely see a much deeper slide to the 170.000s, based on an extrapolation of the height of the wedge lower.  

A break above the 193.50 highs, however, would provide confirmation the dominant bull trend was still intact and continuing higher. 

Although it looks overstretched, such a move could meet an next upside target at the 195.88 highs of 2015. 

• GBP/JPY retreats to 190.69, down 0.61%, missing the 194.00 psychological level.
• Uptrend signaled, with 190.75 support possibly curbing losses.
• Overcoming 191.00 resistance key to approach near 193.00 highs.

The GBP/JPY retreats deeper below the 190.00 figure after hitting a 9-year high of 193.55, as buyers fail to push through the latter and aim toward the 194.00 mark. At the time of writing, the pair traded at 190.69, down 0.61%.

GBP/JPY Price Analysis: Technical outlook

Despite falling, the GBP/JPY remains upward biased despite posting losses. The confluence of the Tenkan and Kijun-Sen at 190.75 capped the pair’s slide, but downside risks remain. If sellers push the exchange rate below the latter, the pair could aim for 190.00. Further losses are seen below that level, as the 189.00 psychological figure would be up next.

However, the path of least resistance is upwards, and if they reclaim the 191.00 figure, look for further gains. The next resistance would be today’s high at 192.23, followed by the 193.00 mark.

GBP/JPY Price Action – Daily Chart

• GBP/JPY pulls back from extremes after the recent bout of Yen weakness. 
• The Pound Sterling weakens after the BoE distribution of voting shows no-one voted for a hike. 
• Japanese PMI data shows steady progress higher, UK data is mixed. 

GBP/JPY is down over half a percent on Thursday, trading in the 192.000s, after a combination of the results of the Bank of England (BoE) policy meeting and weaker-than-expected UK PMI data, weighed on the Pound Sterling (GBP). 

An improvement in Japanese data, meanwhile, may have helped staunch the recent hemorrhaging experienced by the Yen (JPY). The Jibun Bank Manufacturing Purchasing Manager Indices (PMI) showed upticks in both Manufacturing and Services sectors in March. 

From a technical perspective, GBP/JPY looks overstretched after breaking out of the top of a Rising Wedge pattern on overbought momentum, according to the Relative Strength Index (RSI). A negative close on Thursday could signal an exit from overbought RSI, providing traders with a sell signal. 

Pound Sterling to Japanese Yen: Daily chart 

BoE voting distribution shows dovish shift

The Bank of England left interest rates unchanged at 5.25% at its meeting on Thursday, as was widely expected. The distribution of votes, however, changed from the previous meeting with zero officials voting for a hike instead of the one before. The majority of eight board members voted for no-change – one more than the seven of the previous meeting – and only one voted for a cut in interest rates, as before. 

The Pound Sterling was hit by the lack of any BoE officials voting to raise interest rates, since higher interest rates are a positive factor for currencies because they attract greater inflows of foreign capital. 

In Japan the opposite happened after the Bank of Japan (BoJ) raised interest rates, at its March meeting. Strangely the move failed to support the Yen. Reasons given were that it was widely telegraphed prior to the meeting, and that at between 0.0% and 0.1% interest rates in Japan are still very low compared to other major economies and unlikely to rise much in the future. This suggests the Yen will continue to be used as a funding currency – borrowed to purchase higher yielding peers. 

Purchasing Manager Indices show mixed results 

The UK S&P Global/CIPS Composite PMI in March came out lower-than-expected at 52.9 when 53.1 had been forecast, from 53.0 previously, on Thursday. The data weighed on GBP. 

UK Services PMI undershot expectations of remaining at 53.8, dropping to 53.4. 

Manufacturing was the bright spot, actually rising to 49.9 when 47.8 had been forecast from 47.5 previous. 

In Japan the Jibun Bank Manufacturing PMI rose to 48.2 in March from 47.2 previously and Services PMI rose to 54.9 from 52.9. 

Technical Analysis: Upside break seems unsustainable 

GBP/JPY sees an upside break above the wedge pattern’s highs but the move looks unsustainable and price is already reversing. A bearish close on Thursday would form a Two Bar reversal pattern on the daily chart – a fairly reliable indicator of more weakness to come.

The RSI will probably exit overbought, another bearish sign. A break back inside the Wedge, confirmed by a decisive move below the upper trendline currently at 191.50, would probably signal further downside. 

Pound Sterling to Japanese Yen: Daily chart

Often a reversal from an overshooting extreme, as is the case with GBP/JPY is a reliable signal to sell. When prices reach bullish extremes and overshoot their trendlines they often reverse sharply and move down quickly. 

• GBP/JPY holds positive ground near 192.80 after the downbeat UK February inflation data. 
• The UK CPI rose 3.4% YoY in February vs. 3.6% estimated. 
• The dovish hike from the BoJ weighs on the JPY against the GBP. 
• The BoE interest rate decision on Thursday will be a closely watched events 

The GBP/JPY cross remains firm below the 193.00 barrier during the early European trading hours on Wednesday. The downbeat UK Consumer Price Index (CPI) inflation data for February did not impact the Pound Sterling (GBP) against the Japanese Yen (JPY). Investors will closely monitor the Bank of England's (BoE) monetary policy meeting on Thursday for fresh catalysts, with no change in rate expected. At the press time, GBP/JPY is trading at 192.80, gaining 0.47% on the day. 

The latest data from the UK Office for National Statistics on Wednesday reported that the nation’s Consumer Price Index (CPI) for February rose 0.6% MoM from a 0.6% fall in the previous month, below the market consensus of a 0.7% increase. On an annual basis, the CPI figure increased 3.4% YoY, easing from a 4.0% rise in January and worse than the market expectation of a 3.6% increase. 

This report will influence the BoE on whether the central bank will signal its first interest rate cut or retain its “higher rate for longer” stance. Meanwhile, the BoE is anticipated to keep interest rates unchanged at 5.25% for the fifth successive meeting on Thursday as inflation is cooling down. 

The BoE governor Andrew Bailey said after the February meeting that the UK central bank saw good news on inflation over the past few months, but policymakers need to see more evidence that inflation is on the course to the 2 % target before BoE can lower interest rates.

On Tuesday, the Bank of Japan (BoJ) decided to raise the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007, as widely anticipated. However, the Japanese policymakers did not provide any guidance about future policy trajectory and stated that financial conditions would remain accommodative for the time being. The uncertainty of the pace of the BoJ's policy normalization exerts some selling pressure on the JPY and acts as a tailwind for the GBP/JPY cross. 

Looking ahead, the Japanese Merchandise Trade Balance Total for February and Jibun Bank Manufacturing PMI for March will be due on Thursday. Market players will shift their attention to the BoE interest rate decision later on Thursday. These events could give a clear direction to the GBP/JPY cross. 

• GBP/JPY extends its winning streak despite hawkish BoJ.
• BoJ board members decided to lift the interest rate to 0% from -0.1%.
• Traders await consumer and producer price data from the United Kingdom.

GBP/JPY has rebounded from intraday losses to extend its winning streak, which commenced on March 12. The pair trades higher around 190.30 during Asian trading hours on Tuesday. The Bank of Japan (BoJ) board members opted to raise the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007.

This decision marks the end of a negative interest rate era. It aligns with market expectations. The much stronger-than-expected pay hikes by major Japanese firms have already laid the groundwork for the BoJ to shift away from the decade-long stimulus measures.

In the United Kingdom (UK), inflation is showing signs of moderation, yet the Bank of England (BoE) maintains a cautious stance until Consumer Prices return to the 2% target. It is expected that the BoE will keep interest rates unchanged at 5.25% during Thursday's meeting. Traders are eagerly awaiting consumer and producer price data scheduled for release on Wednesday.

Due to softer Consumer Inflation Expectations on Friday, which increased by 3.0% but slightly lower than the previous uptick of 3.3%, market speculation arose regarding a potential Bank of England (BoE) rate cut. Investors anticipate the BoE to commence rate cuts in August, with one or two additional cuts by year-end. Such sentiment could have weakened the Pound Sterling (GBP) and undermined the GBP/JPY cross.

• GBP/JPY has likely formed a Broadening topping pattern. 
• It has just reversed after touching the top of the pattern and looks poised for a down-leg. 
• The overall long-term trend, however, is bullish with a breakout from the pattern required to reverse. 

GBP/JPY appears to be forming a bearish Ascending Broadening Wedge formation. The pair has just rallied to the pattern’s upper boundary line before forming a double top and pulling back. There is now a good chance it has begun the next down-leg of the pattern. 

A decisive break below support at the 187.96 March 11 lows and the nearby 50-day Simple Moving Average (SMA) would confirm a continuation of the next down leg within the wedge.  

Pound Sterling versus Japanese Yen: Daily chart

Such a move would probably see GBP/JPY fall to support near the 50-week Simple Moving Average (SMA) at 181.60. 

It is worth noting that although a deep correction looks on the cards, over the long-term, the peaks and troughs of price are rising. This likely indicates GBP/JPY is in an overall uptrend, which is likely to continue as long as price does not break completely out of the bottom of the wedge at around 180.80-90. A downside breakout, however, would confirm a reversal of the long-term uptrend. 

A break above the 191.32 highs would provide confirmation the dominant bull trend was intact and continuing higher. Although it looks overstretched, such a move is still possible given the overall bullishness of the chart. The next upside target from there would probably be resistance at the 195.88 highs of 2015.

• GBP/JPY rises buoyed by uncertainty over BoJ's interest rate stance, marking a weekly gain.
• Recovery from near the 50-day DMA suggests bullish momentum, with eyes on the 190.00 resistance mark.
• A drop below the Kijun Sen could signal a correction phase, with significant support at the March 11 low.

The Pound Sterling extended its gains versus the Japanese Yen and is set to finish the week with gains, as the GBP/JPY trades at 189.72, gains 0.34%. Bank of Japan (BoJ) officials delivering mixed messages during the week prompted investors to sell the Yen as speculations grew the BoJ would not raise rates.

GBPJPY Price Analysis: Technical outlook

The cross-pair has recovered after dipping near the 50-day moving average (DMA) at 187.84, capping the GBP/JPY slide amid BoJ’s ending negative interest rates. Once those dissipated, a ‘bullish harami’ candle pattern emerged, pushing the spot prices higher. As of writing, the next resistance level would be 190.00. A breach of the latter would expose the March 4 high of 191.18, followed by the year-to-date high of 191.32.

For a bearish scenario, sellers must drag the price below the Kijun Sen o f58, ahead of the Senkou Span A at 189.64. Although this suggests that the pair is in an ongoing correction, a drop below the March 11 low of 187.96 could open the door for a deeper pullback.

GBPJPY Price Action – Daily Chart

• GBP/JPY cycled 189.00 on thin data as investors await rate moves.
• Markets await further detail from BoJ after spring wage negotiations.
• Mid-tier UK Consumer Inflation Expectations to round out Friday.

GBP/JPY rallied and dipped before recovering to the midrange on Thursday, spinning in place near the 189.00 handle as Guppy traders look for movement from the Bank of Japan (BoJ). The BoJ is expected to lift interest rates out of negative rate territory after the Japanese central bank widely telegraphed earlier in the year that high wage increases from spring wage negotiations would push the BoJ into ending the negative rate regime.

Japan’s largest labor confederation reported last week that spring wage negotiations saw the biggest wage rise demands from its workers in over three decades, hitting a 31-year high. According to the Japanese Trade Union Confederation, the average rate of wage increases demanded by its various unions was 5.85%, a full percentage point higher than the same time last year and the largest increase since the 7.15% wage hike in 1993.

It’s a thin showing on the economic calendar for both the Pound Sterling (GBP) and the Japanese Yen (JPY) as markets round the corner into the Friday market session. UK Consumer Inflation Expectations for the year are slated for early in the London trading session, but the release is strictly mid-tier. At last print, UK consumers expected the next 12 months of inflation to land somewhere around 3.3%.

GBP/JPY technical outlook

The Guppy opened Thursday with an anemic rally from the 189.00 handle into the day’s peak bids near 189.50. The pair caught a downside technical rejection from the 200-hour Simple Moving Average (SMA) at 189.43 to set a daily low near 188.60 before recovering into the day’s opening range.

Daily candles remain capped by a firm technical ceiling at the 191.00 handle, but the pair is holding onto median technical levels after several days of declines. The GBP/JPY remains well-supported by a bullish 200-day SMA rising above 184.20.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY rises after data shows UK house prices recovering for the sixth consecutive month. 
• The Yen side of the pair weakens as bets of a BoJ rate hike in March fade. 
• Technically GBP/JPY is threatening to pullback in the midst of a strong uptrend. 

The GBP/JPY is up almost two tenths of a percent, trading in the mid 189.00s during the European session on Thursday after the Pound Sterling (GBP) side of the pair was buoyed by the release of British data which revealed a recovery in UK house prices in February. 

The data follows on from the UK’s positive monthly real GDP print released on Wednesday, which showed the UK economy growing by 0.2% in January after declining 0.1% in December. The data stoked hopes the country may be exiting from its technical recession triggered by the dismal growth performance in the last quarter of 2023. 

An Englishman’s house is his castle

The RICS Housing Price Balance, a survey of surveyors conducted by the Royal Institute of Chartered Surveyors (RICS) showed a rise to minus 10 in February from minus 18 in January, and higher than the minus 11 forecast. It marks the sixth month in a row that house prices have recovered in the UK and is the least negative reading since October 2022. 

GBP/JPY holds ground after Yen slides on fading BoJ bets

The Japanese Yen (JPY) side of GBP/JPY, meanwhile, remains on the defensive amidst a positive risk-on environment on Thursday and after traders reduced their bets the Bank of Japan (BoJ) would start to raise interest rates imminently. 

The Japanese media had been reporting BoJ officials as indicating the March meeting, next Tuesday, was being earmarked as the moment for an interest rate hike. 

Recent wage negotiations between Japanese unions and large corporations like Toyota have led to record wage increases, which are expected to be inflationary and further urge an increase in interest rates.

BoJ Governor Kazuo Ueda, however, said earlier this week that the central bank will seek an exit from easy policy only when achievement of 2% inflation is in sight, cooling bets for an early hike.

The Japanese Yen has become a favorite funding currency in which it is borrowed and sold to buy currencies that offer higher interest returns. If the BoJ begins putting up interest rates the Yen will lose its appeal as a funding currency, leading to less Yen selling and a stronger JPY. 

Uptrend could see a pullback 

GBP/JPY is in a long-term uptrend with peaks and troughs getting progressively higher. This favors bullish bets and the pair will probably continue rising, although there are some important caveats to that view. 

Firstly, the weekly chart is showing bearish divergence between price action and Momentum. Price has been making higher highs since June 2023 whilst momentum, as measured by the Relative Strength Index (RSI), has not, reflecting underlying weakness, and suggesting an increased chance of a pullback evolving. 

Pound Sterling versus Japanese Yen: Weekly chart

It’s too early to say a deeper correction will unfold but if this week prints red, it would form a Japanese Three Black Crows bearish reversal pattern which could indicate the possibility of more downside evolving. 

If a pullback does evolve it would probably see GBP/JPY fall to support near the 50-week Simple Moving Average (SMA) at 181.60. 

Another bearish sign is that GBP/JPY has formed an Ascending Broadening Wedge pattern, which suggests an increased risk of a reversal in the uptrend, if price breaks below the lower borderline of the pattern at 180.80-90. 

A break above the 191.32 highs would provide confirmation the dominant bull trend was intact and continuing higher. Although it looks overstretched, such a move is still possible given the bullishness of the chart. The next upside target from there would be resistance expected at the 195.88 highs of 2015.

• GBP/JPY trapped near 189.00 after a failed bid for 189.50.
• BoJ continues to flirt with hints about the end of negative rates.
• UK data provides little spark for chart moves this week.

GBP/JPY saw a thin rally on Wednesday, testing into 189.50 before wrapping up the midweek trading session near the 189.00 handle. The pair is cautiously recovering after an early-week dip into the 188.00 handle.

The Bank of Japan (BoJ) continues to wink at the possibility of ending the negative rate regime. BoJ Governor Kazuo Ueda nodded at “tweaking negative rates” early Wednesday, as the BoJ prepares to place the burden of the final decision on the shoulders of spring negotiations on wages between unions and management at large business organizations. The BoJ has been openly transparent that how hawkish or dovish the Japanese central bank will be in the near-term will hinge entirely on wage growth following the end and data collection of Japan’s spring negotiations.

UK data came in mixed early on Wednesday, but did little to move the needle. UK Industrial Production fell to -0.2% in January after December’s 0.6% print, missing the forecast flat print of 0.0%. UK MoM Manufacturing Production also declined, coming in at the expected 0.0% compared to the previous 0.8%. UK Gross Domestic Product (GDP) in January also met expectations, printing at 0.2% versus the previous -0.1%.

The rest of the trading week sees only thin data for both the Pound Sterling (GBP) and the Japanese Yen (JPY). Friday will round out the Guppy’s hits on the economic calendar with mid-tier UK Consumer Inflation Expectations for the next 12 months. UK consumer inflation forecasts last printed at 3.3%.

GBP/JPY technical outlook

GBP/JPY is on a slow grind higher after Monday’s bounce from the 188.00 handle, facing intraday technical resistance from 189.50 as the pair drifts around 189.00. A stiff supply zone is built into the 191.00 region to capture any bullish pushes into the high end.

Despite the recent end of a five-day bear run in the GBP/JPY chart after the pair backslid from 191.00, the Guppy is barely down from its highest bids since 2015, and the pair remains well-bid above the 200-day Simple Moving Average (SMA) at 184.14.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY attracts some dip-buying for the second straight day, albeit lacks follow-through.
• The uncertainty over the BoJ’s next policy move undermines the JPY and lends support.
• The mixed UK macro data does little to impress the GBP bulls or provide any impetus.

The GBP/JPY cross turns positive for the second successive day following an early dip to the 188.40 region on Wednesday and looks to build on the overnight bounce from a near one-month low. Spot prices, meanwhile, react little to the UK macro data and hold steady around the 189.00 mark during the early European session.

The Japanese Yen (JPY) meets with a fresh supply after the Bank of Japan (BoJ) Governor Kazuo Ueda reiterated that the central bank will seek an exit from easy policy when achievement of 2% inflation is in sight. The comments smashed hopes for an imminent shift in the BoJ's policy stance next week, which, in turn, undermines the JPY and assists the GBP/JPY cross to attract some dip-buying.

Investors, however, seem convinced that the BoJ will pivot away from its ultra-dovish policy stance and exit the negative interest rates regime in the coming months. The bets were reaffirmed by positive news on wage hikes in Japan, which is expected to fuel consumer spending and demand-driven inflation. This, along with geopolitical risks, helps limit losses for the JPY and caps the GBP/JPY cross.

The British Pound (GBP), on the other hand, is underpinned by expectations that the Bank of England (BoE) might keep interest rates higher for longer. Meanwhile, the upbeat UK GDP print, showing that the economy expanded by 0.2% in January, was overshadowed by weaker Industrial and Manufacturing Production figures. This, in turn, does little to provide any impetus to the GBP/JPY cross.

The aforementioned fundamental backdrop, however, seems tilted in favour of bullish traders. That said, it will still be prudent to wait for some follow-through buying before positioning for any meaningful appreciating move ahead of next week's key central bank event risk – the highly-anticipated BoJ monetary policy decision on Tuesday.

• GBP/JPY loses ground on Wednesday as JPY strengthens on BoJ’s contemplation of a rate hike.
• Upbeat Japan’s producer inflation data could reinforce the BoJ to raise rates soon.
• Japanese firms have agreed to the demands for pay increases of 5.85% this year.

GBP/JPY retraces its recent gains recorded on Tuesday, slipping to near 188.70 during the Asian trading session on Wednesday. The Japanese Yen (JPY) is bolstered by market speculation that the Bank of Japan (BoJ) is contemplating an interest rate hike in March.

Furthermore, Japan's spring wage negotiations showed that firms have acquiesced to the demands of the country's largest trade union confederation, Rengo, for pay increases of 5.85% this year, surpassing 5.0% for the first time in 30 years. Additionally, Japan's Chief Cabinet Secretary Yoshimasa Hayashi expressed his desire to see widespread wage hikes across the economy.

The higher-than-expected producer inflation data from Japan reinforces the belief that the Bank of Japan (BoJ) could commence raising rates soon, bolstering the JPY and consequently weakening the GBP/JPY cross.

On Tuesday, UK Average Earnings Including Bonuses for the period from November 2023 to January 2024 eased to 5.6% from 5.8% in the previous reading, while annual wage growth excluding bonuses dropped to 6.1% compared to 6.2% previously. The likelihood of rate cuts by the Bank of England (BoE) this year increased marginally, with traders now expecting three rate cuts.

The Pound Sterling (GBP) has recently emerged as one of the top two performers among the major currencies. Economists at Commerzbank are analyzing the outlook for the GBP, though uncertainty remains regarding how long the Pound's strength will persist. Presently, the GBP's strength appears somewhat fragile.

• GBP/JPY up as BoJ's Ueda's cautious view weakens Yen.
• UK jobs disappoint, and higher unemployment and lower wages hurt the Pound, as peculation on BoE rate cuts increased.
• BoE Bailey: Central banks need to evaluate how restrictive rates need to be.

The GBP/JP/registered modest gains of 0.29% in the mid-North American session after Bank of Japan (BoJ) Governor Kazuo Ueda's speech weakened the Japanese Yen on cautious remarks. Despite that, the Pound Sterling was capped by a softer-than-expected UK employment report. The pair exchanged hands at 168.72 after hitting a daily low of 187.97.

BoJ Governor’s Ueda remarks and UK employment data, weighed on the JPY

During the Asian session, BoJ Kazuo Ueda said the economy is recovering modestly and still shows signs of weakness following weak data releases. Ueda acknowledged that consumption of food and daily necessities is weakening as prices climb. He added that household spending is improving moderately and is awaiting higher wages.

BoJ Governor Ueda failed to provide forward guidance regarding ending negative rates. According to Bloomberg, sources said the BoJ is considering increasing borrowing costs in March, though the outcome of the decision is still too close to call between the March and April meetings.

Lately, Bank of England Governor Andrew Bailey has been making headlines by saying that major central banks need to question how restrictive their policy is and how long it needs to stay put. Bailey added that policy is doing its job and noted that inflation expectations are well anchored.

On the data front, the latest jobs data in the UK witnessed a jump in the unemployment rate, from 3.6% to 3.9% YoY, as 21,000 jobs were cut from the workforce. Wage growth slid from 6.2% to 6.1% in the last quarter of 2023, said the Office for National Statistics (ONS). After the data, markets increased bets on a BoE rate cut in June, though the first fully priced-in rate cut is expected in August.

GBP/JPY Price Analysis: Technical outlook

The daily chart portrays the pair as neutral to upward biased, and if buyers achieve a daily close above the March 11 open of 189.14, that could open the door for further upside. In that case, the next resistance level is seen at the Tenkan Sen at 189.57, followed by the 190.00 psychological level. On the flip side, the first support would be the 50-day moving average (DMA) at 187.84, followed by the February 8 low of 186.86.

• GBP/JPY gains strong positive traction on Tuesday in reaction to dovish BoJ comments.
• The mixed UK jobs report prompts some GBP selling and caps the upside for the cross.
• The fundamental backdrop warrants caution before placing aggressive bearish bets.

The GBP/JPY cross stages a goodish recovery from sub-188.00 levels on Tuesday and for now, seems to have snapped a five-day losing streak to a nearly one-month low touched the previous day. Spot prices, however, retreat a few pips from the daily peak in reaction to mixed UK monthly jobs report and currently trade around the 188.75 region.

The UK Office for National Statistics (ONS) reported that the number of people claiming unemployment-related benefits rose to 16.8K in February as compared to the previous month's downwardly revised reading of 3.1K and the 20.3K expected. The better-than-anticipated headline number, however, was offset by an uptick in the unemployment rate to 3.9% during the three months to January and a slight moderation in the UK wage growth data. This, in turn, prompts some selling around the British Pound (GBP) and the GBP/JPY cross.

Market participants, however, seem convinced that the Bank of England (BoE) to keep interest rates higher for longer despite a sluggish economy. This, in turn, might hold back the GBP bears from placing aggressive bets. Meanwhile, the Bank of Japan (BoJ) Governor Kazuo Ueda fell short of providing any hints about exiting negative rates or scrapping the Yield Curve Control (YCC) policy. This, along with a generally positive risk tone, is seen weighing heavily on the Japanese Yen (JPY) and should contribute to limiting the downside for the GBP/JPY cross.

• GBP/JPY down, near 188.04, on BoJ policy change rumors.
• Sterling's future uncertain without UK data; employment figures crucial.
• Technical signs suggest more drops; key support levels watched.

The GBP/JPY clings to the 188.00 figure and prints losses of 0.51% in the mid-North American session. The pair exchanges hands at 188.04 after dropping from a daily high of 189.17.

Rumors about a sudden end of negative interest rates by the Bank of Japan (BoJ) sponsored a leg up in the Yen against most G7 currencies. An absent UK economic docket keeps Sterling pressured, though employment figures could favor Cable on Tuesday.

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY has extended its losses below the Tenkan and Kijun-Sen levels, which exacerbated a drop to a four-week low of 187.95. However, buyers lifted the exchange rate, and the pair has bottomed out around the 188.00 mark as of writing. A daily close above the latter and a leg-up could be on the cards.

Otherwise, the downtrend could extend towards the 50-day moving average (DMA) at 187.64, followed by the 187.00 mark. Once cleared, the next support would be the 100-DMA at 185.77.

GBP/JPY Price Action – Daily Chart

• GBP/JPY's descent under the 190.00 mark aligns with a broader downward trend, eyeing further technical levels.
• A pivotal close below the February 29 low could open paths towards 188.73 Kijun-Sen and beyond.
• Recovery hinges on reclaiming ground above 189.00, with resistances waiting at 189.71 and the early March highs.

The GBP/JPY fell for the fourth straight day late in the North American session, set to finish the week with losses of 0.44%, below the 190.00 threshold. At the time of writing, the cross trades at 188.98, down 0.31%.

GBP/JPY Price Analysis: Technical outlook

After diving below February 29 low of 189.04, the GBP/JPY has tilted to the downside, but sellers need to achieve a daily close below that level, so they test the Kijun-Sen at 188.73. Further losses are seen at 188.00, followed by the 50-day moving average (DMA) at 187.47.

On the other hand, if buyers move in and the pair prints a close above 189.00, that could sponsor a leg up. The first resistance would be the Tenkan-Sen at 189.71, followed by the March 7 high at 190.14. the next ceiling level would be the March 4 high at 191.18.

GBP/JPY Price Action – Daily Chart

• GBP/JPY finds an intermediate support near 188.60. More downside likely on BoJ rate hike bets.
• BoJ policymakers see a positive cycle for wage growth, able to keep inflation above 2%.
• The Pound Sterling will be guided by the UK’s labor market data, scheduled for next week.

The GBP/JPY pair discovers temporary support near 188.60 after sharply correcting from 191.00 in the last three trading sessions. The asset is expected to witness more downside as market expectations for the Bank of Japan (BoJ) abandoning negative interest rates have improved.

A few BoJ policymakers expect a positive cycle in wage growth, improving the odds of inflation remaining above the 2% target sustainable. The BoJ had been reluctant to exit the expansionary policy stance as policymakers were not convinced that wage growth would continue to grow steadily. Investors hope the BoJ will shift to policy normalization in the March monetary policy meeting.

The Japanese Yen would witness strong buying interest if the BoJ delivers a hawkish interest rate decision, as its monetary policy has remained extremely dovish for more than a decade.

Meanwhile, the Pound Sterling awaits fresh guidance on interest rates. The United Kingdom's economic calendar remained light this week. Going forward, investors will focus on the labor market data for three months ending in January, which will be published early next week. Investors will keenly focus on the Average Earnings data, which will provide a fresh outlook on inflation.

The UK’s wage growth has remained almost double what is required to be consistent with the return of inflation to 2%. Strong wage growth momentum would dampen market expectations for rate cuts, which could result in higher investment in the Pound Sterling.