GBP
- The BoE left interest rates unchanged as expected at the last meeting with no dovish language as they reaffirmed that they will keep rates high for sufficiently long to return to the 2% target.
- Governor Bailey pushed back against rate cuts expectations as he said that they cannot say if interest rates have peaked.
- The latest employment report missed forecasts with wage growth coming in much lower than expected and job losses in November.
- The UK CPI missed expectations across the board, which is another welcome development for the BoE.
- The UK PMIs showed the Manufacturing sector falling further into contraction while the Services sector continues to expand.
- The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
- The market expects the BoE to start cutting rates in Q2 2024
JPY
- The BoJ kept its monetary policy unchanged at the last meeting with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
- Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases unless wage growth picks up.
- The latest Japanese CPIshowed that inflationary pressures are easing although they remain well above the BoJ’s 2% target.
- The latest Unemployment Rate remained unchanged near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction but the Services PMI ticked higher remaining in expansion.
- The latest Japanese wage data beat expectations and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The market expects the BoJ to hike rates in Q2 2024.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPJPY started to range after the big selloff from the cycle high. The pair maintains a bearish bias though as the rate cuts expectations for the BoE ramp up and the BoJ could exit the negative interest rates policy in Q2. The red 21 moving average has been acting as a dynamic resistance but it got breached today, which might be a signal that the pair could reach the 184.45 resistance next.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair even broke out of the trendline and the recent swing high around the 182.20 level. This is where the sellers stepped in but folded as soon as the price extended to the upside. The buyers, on the other hand, increased their bullish bets and are now targeting the 184.45 resistance.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action with today’s breakout. From a risk management perspective, late buyers might want to wait for a pullback into the upward trendline where they will also find the confluence with the red 21 moving average and the previous swing level. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the lows.
Upcoming Events
Today we will have another slate of US labour market data with the release of the US ADP and Jobless Claims figures. Tomorrow, we conclude the week with the NFP report and the ISM Services PMI. Weak data is likely to weigh on global yields and favour the Yen while strong figures could make the market to price out some of the rate cuts and lead to more upside in the pair.
