Published on Jun 15, 2023

Daily Analysis For GBP/JPY 15-06-2023

GBP/JPY Analysis

Key Points: -

· The GBP/JPY pair has extended its gains for the second consecutive day, driven by strong expectations of continued policy divergence between the Bank of England (BoE) and the Bank of Japan (BoJ). The divergence in policies between the two central banks has been a significant factor supporting the upward momentum of the pair.

· In Japan, the likelihood of the BoJ making adjustments to its monetary policy to sustain inflation above the 2% target is low. The central bank is expected to maintain its current accommodative stance to ensure stability in inflation. This divergence in monetary policy between the BoJ and the BoE has contributed to the bullish sentiment surrounding the GBP/JPY pair.

· On the other hand, BoE Governor Andrew Bailey has reassured that although inflation is expected to decrease, it will take longer than initially anticipated. This statement implies that the BoE may maintain its relatively hawkish stance, which further supports the positive outlook for the GBP/JPY pair.

· Overall, the GBP/JPY pair is benefiting from the anticipation of continued policy divergence between the BoE and the BoJ, with the BoJ expected to maintain its accommodative policy and the BoE signaling a longer timeline for inflation to subside.

Today's Scenario: -

GBP/JPY remains slightly lower around the 176.70-80 level, showing limited response to UK economic data in the early morning hours in London. The currency pair is consolidating after experiencing its largest daily gain in 1.5 months and reaching the highest levels since January 2016 on the previous day.

With anticipation building ahead of the Federal Reserve's monetary policy announcements and a relatively light Asian calendar, GBP/JPY bulls take a breather during the early part of this important day. The pair's recent movements are also influenced by mixed British data and lackluster Treasury bond yields.

Regarding the UK statistics, the headline Gross Domestic Product (GDP) for April shows growth matching the previous month's figure of 0.2%, while Industrial Production declines during the same period. Both Industrial Production and the Index of Services for the three months leading up to April disappoint.

It is worth noting that previous job numbers and inflation data from the UK have raised concerns about a potentially hawkish stance from the Bank of England (BoE), which keeps buyers of the British Pound (GBP) optimistic despite the recent mixed data.

On the other hand, Japanese inflation figures have been improving recently, but officials from the Bank of Japan (BoJ) continue to defend their ultra-easy monetary policy stance. Another factor that could impact GBP/JPY is the upcoming issuance of multi-billion-dollar bonds by the US Treasury Department due to the US debt-ceiling deal.

Additionally, US 10-year Treasury bond yields retreat from a 13-day high of 3.83% to 3.80%, while the two-year yields reach their highest levels in three months at 4.70% before easing to 4.66% at the latest. This has restrained the bullish momentum of GBP/JPY.

Looking ahead, GBP/JPY may maintain its positive bias due to the divergence between the BoE and BoJ policies. However, concerns about the UK's economic transition could cause temporary volatility in the pair.

Diagram of GBP/JPY: -

Economic Events: -

Date Event Impact Currency

0:00 (United States) Fed Press Conference High USD

4:15 (New Zealand) GDP Growth Rate YoY Medium NZD

4:15 (New Zealand) GDP Growth Rate QoQ Medium NZD

5:20 (Japan) Foreign Bond Investment Low JPY

5:20 (Japan) Stock Investment by Foreigners Low JPY

5:20 (Japan) Machinery Orders YoY Medium JPY

5:20 (Japan) Machinery Orders MoM Medium JPY

5:20 (Japan) Imports YoY Low JPY

5:20 (Japan) Balance of Trade High JPY

5:20 (Japan) Exports YoY Medium JPY

5:30 (Euro Area) Eurogroup Meeting Medium EUR

7:00 (Australia) Consumer Inflation Expectations Low AUD

7:00 (Australia) Part Time Employment Chg Medium AUD

7:00 (Australia) Participation Rate Low AUD

7:00 (Australia) Full Time Employment Chg Medium AUD

7:00 (Australia) Unemployment Rate High AUD

7:00 (Australia) Employment Change High AUD

7:00 (Australia) RBA Bulletin Medium AUD

7:00 (China) PBoC 1-Year MLF Announcement Low CNY

7:00 (China) House Price Index YoY Medium CNY

7:30 (China) Unemployment Rate High CNY

7:30 (China) Retail Sales YoY High CNY

7:30 (China) Industrial Production YoY High CNY

7:30 (China) Fixed Asset Investment (YTD) YoY Medium CNY

9:05 (Japan) 3-Month Bill Auction Low JPY

10:00 (Japan) Tertiary Industry Index MoM Low JPY

10:00 (Netherlands) Unemployment Rate Medium EUR

10:30 (Finland) GDP YoY Low EUR

12:00 (Switzerland) Producer & Import Prices MoM Low CHF

12:00 (Switzerland) Producer & Import Prices YoY Low CHF

12:15 (France) Inflation Rate MoM Medium EUR

12:15 (France) Inflation Rate YoY Medium EUR

12:15 (France) Harmonised Inflation Rate MoM Low EUR

12:15 (France) Harmonised Inflation Rate YoY Low EUR

13:30 (Spain) Balance of Trade Medium EUR

14:10 (Spain) Obligacion Auction Low EUR

14:10 (Spain) Bonos Auction Low EUR

14:30 (Euro Area) Balance of Trade Medium EUR

14:30 (France) 5-Year OAT Auction Low EUR

14:30 (France) 3-Year OAT Auction Low EUR

14:30 (Greece) Construction Output YoY Low EUR

14:30 (Montenegro) Inflation Rate YoY Low EUR

14:30 (Montenegro) Harmonised Inflation Rate YoY Low EUR

14:30 (Montenegro) Inflation Rate MoM Low EUR

15:00 (Belgium) Construction Output YoY Low EUR

15:30 (France) 10-Year Index-Linked OAT Auction Low EUR

15:30 (Ireland) Balance of Trade Low EUR

16:00 (Portugal) Economic Activity YoY Low EUR

16:00 (Portugal) Private Consumption YoY Low EUR

17:45 (Canada) Housing Starts Medium CAD

17:45 (Euro Area) ECB Interest Rate Decision High EUR

17:45 (Euro Area) Marginal Lending Rate Low EUR

17:45 (Euro Area) Deposit Facility Rate High EUR

18:00 (Canada) Manufacturing Sales MoM Low CAD

18:00 (United States) Import Prices YoY Low USD

18:00 (United States) Export Prices YoY Low USD

18:00 (United States) Import Prices MoM Medium USD

18:00 (United States) Export Prices MoM Medium USD

18:00 (United States) NY Empire State Manufacturing Index Medium USD

18:00 (United States) Retail Sales YoY High USD

18:00 (United States) Retail Sales Ex Autos MoM High USD

18:00 (United States) Retail Sales MoM High USD

18:00 (United States) Philly Fed Business Conditions Low USD

18:00 (United States) Philly Fed Employment Low USD

18:00 (United States) Philly Fed CAPEX Index Low USD

18:00 (United States) Philly Fed Prices Paid Low USD

18:00 (United States) Philly Fed New Orders Low USD

18:00 (United States) Philadelphia Fed Manufacturing Index Medium USD

18:00 (United States) Jobless Claims 4-week Average High USD

18:00 (United States) Continuing Jobless Claims High USD

18:00 (United States) Initial Jobless Claims High USD

18:00 (United States) Retail Sales Ex Gas/Autos MoM High USD

18:15 (Euro Area) ECB Press Conference High EUR

18:30 (Belgium) Balance of Trade Low EUR

18:30 (Kosovo) GDP Growth Rate YoY Low EUR

18:45 (United States) Capacity Utilization Low USD

18:45 (United States) Manufacturing Production YoY Low USD

18:45 (United States) Industrial Production YoY Medium USD

18:45 (United States) Industrial Production MoM Medium USD

18:45 (United States) Manufacturing Production MoM Low USD

19:30 (United States) Business Inventories MoM Medium USD

19:30 (United States) Retail Inventories Ex Autos MoM Low USD

20:00 (United States) EIA Natural Gas Stocks Change Low USD

21:00 (United States) 8-Week Bill Auction Low USD

21:00 (United States) 4-Week Bill Auction Low USD

21:05 (United Kingdom) BoE Cunliffe Speech Low GBP

21:30 (Canada) 2-Year Bond Auction Low CAD

21:30 (United States) 15-Year Mortgage Rate Low USD

21:30 (United States) 30-Year Mortgage Rate Low USD

Buy Scenario: -

The GBP/JPY pair is experiencing a strong rally in the Asian session, reaching a fresh multi-week high. The pair has surged from a low of 177.25 to a high of 177.97 so far.

According to the monthly Gross Domestic Product (GDP) report, the UK economy expanded by 0.2% in April. This positive growth figure, combined with stronger-than-anticipated inflation and recent employment data, has intensified the pressure on the Bank of England to consider additional interest rate hikes in response to persistent price pressures.

The overall market sentiment is currently favoring the GBP/JPY bulls, and the pair's upward trajectory is being supported by a combination of hawkish expectations from the Bank of England and the dovish stance of the Federal Reserve. As a result, the GBP/JPY pair has been able to reach new highs in the Asian session. Till we do not advise to buy GBP/JPY.

Sell Scenario: -

The Japanese Yen is facing downward pressure as a result of the Federal Reserve's hawkish pause in their recent interest rate decision. This favorable environment for GBP/JPY is supporting the bullish sentiment driven by a similar hawkish narrative at the Bank of England. Till we do not advise to sell GBP/JPY.