Daily Analysis For GBP/JPY   15-06-2023

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.


Support and Resistance Level: -

Support          Resistance  

S1 176.74   -  R1 177.73

S2 176.10  -   R2 178.07

S3 175.75  -   R3 178.71


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