The GBP/JPY cross initiates the new week with a weakened stance, partially reversing Friday’s upward surge to a nearly two-week high, hovering around the mid-182.00s.
Sustaining its intraday decline, the pair faces downward pressure following the release of disappointing UK PMI figures, dragging spot prices down to the 181.20-181.15 region – marking a fresh daily low in the early European session.
The British Pound (GBP) shows broad weakness after the S&P Global/CIPS preliminary report reveals the UK manufacturing sector’s business activity contracted for the eleventh consecutive month in July.
Additionally, the UK services sector’s gauge indicates a further slowdown in growth for the same period. Last week’s softer UK consumer inflation figures also contribute to market expectations for a less aggressive policy tightening by the Bank of England (BoE), consequently putting downward pressure on the GBP/JPY cross.
In parallel, apprehensions regarding global economic slowdown, escalating US-China tensions, and geopolitical risks favor the safe-haven Japanese Yen (JPY), contributing to the intraday decline.
However, the JPY’s bullish momentum is limited due to growing acceptance that the Bank of Japan (BoJ) will maintain its dovish stance after the conclusion of a two-day meeting on Friday. A government spokesperson mentioned that Japan’s inflation is likely to slow to around 1.5% next year, discounting one-off factors.
On the other hand, Japan’s top currency diplomat, Masato Kanda, expressed that recent inflation and wage increases have exceeded expectations, and data so far supports the possibility of an upgrade in the BoJ’s inflation forecasts.
As a result, the focus of the market remains on the upcoming BoJ monetary policy update scheduled for Friday, which is expected to influence the JPY and provide direction to the GBP/JPY cross. Traders should exercise caution, especially those bearishly positioned and expecting significant losses.
Please continue to read new articles here about merchandise assessed by Waytrade.