GBP/JPY fades 149.50 ahead of UK’s inflation on Wednesday
|- The Producer Price Index for April is scheduled on Wednesday and should give GBP/JPY a directional move. inflation, Retail Sales
- As expected, BoE officials were dovish and cautious in their testimony before the Parliament’s Treasury Select Committee, earlier in Europe.
The GBP/JPY cross is trading at around 149.19 up 0.08% this Tuesday.
GBP/JPY found an intraday low at 148.76 in Asia then rose to the 149.72 level in early Europe ahead of the UK’s Inflation Report Hearings. The cross is now retracing its advance and is trading in the 149.20 region.
Earlier in the European session, the Bank of England (BOE) policymakers testified on the inflation and economic outlook before the Parliament’s Treasury Select Committee (TSC). As expected the comments were dovish and cautious.
In fact, the UK Central Bank Governor Carney said “households, businesses understand that rates are likely to rise at a gentle pace,” and that “it is right to wait for more data.” In other words, the BoE is data-dependant for further rate hikes decisions.
Looking ahead, investors will be on the lookout for the barrage of data on Wednesday with the Consumer Price Index (inflation), Producer Price Index and Retail Sales Price Index for April. In Japan, the Nikkei Purchasing Managers' Index (PMI) is slated at 00:30 on Wednesday but this piece of data is likely going to be overshadowed by the UK data dump later on in the day.
In Asia, Bank of Japan's Governor Haruhiko Kudora said he would exit the current ultra-loose monetary policy if the inflation picks up in Japan while Bank of Japan Deputy Governor Masazumi Wakatabe said: “my feeling now is that we can achieve our inflation target with the current policy.” Although the comments are slightly hawkish in nature, the market has not reacted to them as the BoJ has made multiple times such remarks without any actual follow-through.
GBP/JPY 4-hour chart
The GBP/JPY currency cross is trading in a bullish channel above its 50 and 100-period simple moving averages (SMA) but below its 200-period SMA suggesting a mild upward bias. Resistances are priced in at the 149.50 and 150.00 swing highs followed by the 150.50 psychological level. To to the downside, investors should likely meet resistance at the 149.00 handle and at the 148.18 swing low.
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