GBP
- The BoE left interest rates unchanged as expected at the last meeting removing the tightening bias but reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
- The latest employment report beat expectations across the board with a positive revision to the December’s negative payroll figure.
- The UK CPI missed expectations across the board but with Services inflation remaining sticky, which continues to support the BoE’s patient stance.
- The latest UK PMIs showed the Manufacturing sector improving but remaining in 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 June.
JPY
- The BoJ kept its monetary policy unchanged as expected with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
- The Japanese CPI eased further across all measures which makes it even harder to expect a rate hike from the BoJ anytime soon.
- The latest Unemployment Rate ticked lower hovering around cycle lows.
- The Japanese PMIs improved for both the Manufacturing and Services measures although the former remains in contractionary territory.
- The Japanese wage data missed expectations again recently although there was a pick up from the prior reading.
- The Tokyo CPI, which is seen as a leading indicator for National CPI, fell much more than expected recently.
- The market expects the BoJ to hike rates in Q2.
GBPJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPJPY broke through the cycle high yesterday following a strong UK labour market report. The buyers remain in control for now and will keep on looking for dip-buying opportunities to target new highs. The sellers, on the other hand, will need some key downside breaks and some help from economic data given that the monetary policy divergence between the BoE and the BoJ remains in place.
GBPJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have now an important zone around the 188.67 level where we can find the confluence with the trendline, the 61.8% Fibonacci retracement level and the red 21 moving average. This is where we can expect the buyers to step in with a defined risk below the trendline to position for new highs. 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 185.25 level.
GBPJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the pair this morning selling off following the miss in the UK CPI report. Overall, the report didn’t change the divergence between the BoE and the BoJ so the buyers will likely fade today’s drop. In case the price breaks lower though, the sellers will likely pile in to target a pullback into the 188.67 support.
Upcoming Events
Tomorrow we will see the latest US Jobless Claims figures and the US Retail Sales. On Friday, we conclude the week with the UK Retail Sales in the morning and later in the day, the US PPI data and the University of Michigan Consumer Sentiment survey.
