GBP/JPY could be set for strong gains over the next two weeks [Video]
|Yesterday Andy Haldane, the Bank of England’s Chief Economist, said that the UK economy is going “gangbusters” and that the UK is already seeing “pretty punchy” price pressures. He commented that the BoE could start tightening the tap on QE. If the BoE does this it is the first step towards policy normalization and rising interest rates. The next BoE meeting is on June 24 and therefore expectations are rising that the BoE will announce the start to bond tapering then following in the BoC’s lead.
The JPY is a risk haven currency and typically sees weakness during times of global optimism. Global optimism is currently being fuelled by widespread vaccine hopes and that should keep the JPY pressured near term.
Key trade risks
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The main risk to this trade is from any unexpected COVID news which causes the JPY to strengthen.
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A sharp rise in US inflation could cause US 10 year yields to move sharply higher and that could result in risk-off trading if the move is hard enough.
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