GBP/JPY continues to grind higher, sets fresh 16-year peak


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  • GBP/JPY
    gained
    0.72%
    on
    Wednesday
    as
    Yen
    continues
    to
    plummet.

  • Thin
    data
    leaves
    central
    bank
    talkers
    as
    the
    driver
    of
    market
    sentiment.

  • BoE
    remains
    captive
    to
    inflation
    data
    looking
    forward.

GBP/JPY
continues
to
grind
out
fresh
16-year
highs
in
unrelenting
Yen
pressure,
and
the
Guppy
found
a
new
peak
above
207.80
on
Wednesday.
A
lack
of
notable
data
from
Japan
leaves
the
Yen
at
the
bottom
of
a
very
deep
rate
differential
hole,
and
a
bounce
in
market
hopes
for
a
rate
cut
from
the

Bank
of
England

(BoE)
gave
the
Pound

Sterling

a
leg
up
across
the
board.

Despite
cautionary
statements
from
two
BoE
policymakers
on
Wednesday,
the
warning
tones
weren’t
cautious
enough,
and
markets
bolstered
the
GBP
on
expectations
of
a
BoE
rate
cut
in
August.
UK
inflation
has
made
plenty
of
progress
since
peaking
in
the
double
digits,
price
growth
remains
a
key
stumbling
block
for
the
UK’s
central
bank.

Coming
up
on
Thursday,
UK
Industrial
and
Manufacturing
Production
figures
for
May
will
either
help
or
hinder
rate
cut
hopes.
MoM
Industrial
Production
is
expected
to
rebound
to
0.2%
from
the
previous
-0.9%
contraction,
while
Manufacturing
Production
is
forecast
to
recover
to
0.4%
from
the
previous
-1.4%
decline.


Read
more
from
BoE:


BoE’s
Mann:

We
need
to
see
sustained
slower
service
inflation

BoE’s
Pill:

Open
question
whether
time
for
cutting
rates
is
now
upon
us

GBP/JPY
technical
outlook

The
Guppy
continues
to
break
into
fresh
highs
on
the
charts,
shattering
any
technical
resistance
before
it
even
gets
the
chance
to
finish
forming.
The
pair
is
already
on
pace
to
chalk
in
another
firmly
green
weekly
candle,
and
GBP/JPY
has
seen
a
week-on-week
gain
for
all
but
one
of
the
last
nine
consecutive
trading
weeks.

GBP/JPY
hourly
chart

GBP/JPY
daily
chart

Japanese
Yen
FAQs

The
Japanese
Yen
(JPY)
is
one
of
the
world’s
most
traded
currencies.
Its
value
is
broadly
determined
by
the
performance
of
the
Japanese
economy,
but
more
specifically
by
the
Bank
of
Japan’s
policy,
the
differential
between
Japanese
and
US
bond
yields,
or
risk
sentiment
among
traders,
among
other
factors.

One
of
the
Bank
of
Japan’s
mandates
is
currency
control,
so
its
moves
are
key
for
the
Yen.
The
BoJ
has
directly
intervened
in
currency
markets
sometimes,
generally
to
lower
the
value
of
the
Yen,
although
it
refrains
from
doing
it
often
due
to
political
concerns
of
its
main
trading
partners.
The
current
BoJ
ultra-loose
monetary
policy,
based
on
massive
stimulus
to
the
economy,
has
caused
the
Yen
to
depreciate
against
its
main
currency
peers.
This
process
has
exacerbated
more
recently
due
to
an
increasing
policy
divergence
between
the
Bank
of
Japan
and
other
main
central
banks,
which
have
opted
to
increase
interest
rates
sharply
to
fight
decades-high
levels
of
inflation.

The
BoJ’s
stance
of
sticking
to
ultra-loose
monetary
policy
has
led
to
a
widening
policy
divergence
with
other
central
banks,
particularly
with
the
US
Federal
Reserve.
This
supports
a
widening
of
the
differential
between
the
10-year
US
and
Japanese
bonds,
which
favors
the
US
Dollar
against
the
Japanese
Yen.

The
Japanese
Yen
is
often
seen
as
a
safe-haven
investment.
This
means
that
in
times
of
market
stress,
investors
are
more
likely
to
put
their
money
in
the
Japanese
currency
due
to
its
supposed
reliability
and
stability.
Turbulent
times
are
likely
to
strengthen
the
Yen’s
value
against
other
currencies
seen
as
more
risky
to
invest
in.