British Pound sits near one-week top, above 215.00 vs weak Yen ahead of UK GDP
- GBP/JPY attracts some dip-buyers on Tuesday amid the underlying JPY bearish sentiment.
- Japan’s fiscal concerns and the wide UK-Japan rate gap continue to undermine the JPY.
- GBP bulls seem hesitant ahead of key UK macro data on Thursday, including the Q2 GDP.
The GBP/JPY cross recovers a modest intraday dip and climbs above the 215.00 psychological mark during the first half of the European session on Tuesday. Spot prices currently trade near an over one-week high, touched on Monday, and seem poised to appreciate further amid a broadly weaker Japanese Yen (JPY).
The brutal market reaction to a joint US-Japan intervention in late July turned out to be short-lived amid growing concerns about Japan's worsening fiscal conditions, aggravated by Prime Minister Sanae Takaichi's aggressive economic stimulus and tax cuts. Adding to this, the persistently wide interest rate gap between Japan and other major economies, including the UK, which has been fueling the so-called carry trade, contributes to the JPY's underperformance and acts as a tailwind for the GBP/JPY cross.
The Bank of Japan (BoJ) lifted the short-term policy rate in June to 1.00%, or the highest since 1995, while the Bank of England's (BoE) base rate is at 3.75%. This leaves a gap of around 275 basis points (bps). Furthermore, investors remain worried that Japan’s economy will remain under strain amid energy supply disruptions due to the Middle East conflict. Japan depends on the Middle East for roughly 95% of its crude oil, suggesting that the path of least resistance for the GBP/JPY cross remains to the upside.
Meanwhile, the British Pound (GBP) struggles to attract buyers amid a modest US Dollar (USD) strength. Traders also seem reluctant ahead of the UK data dump, including the Q2 GDP report, on Thursday, which might keep a lid on any further appreciation move for the GBP/JPY cross. Nevertheless, the fundamental backdrop validates the near-term positive outlook. This, in turn, suggests that any corrective pullback could be seen as a buying opportunity and is more likely to remain limited.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | -0.11% | 1.00% | -0.10% | 0.16% | 0.37% | 0.41% | |
| EUR | -0.15% | -0.27% | 0.81% | -0.35% | -0.03% | 0.13% | 0.16% | |
| GBP | 0.11% | 0.27% | 1.03% | -0.08% | 0.24% | 0.40% | 0.42% | |
| JPY | -1.00% | -0.81% | -1.03% | -0.79% | -0.50% | -0.46% | -0.38% | |
| CAD | 0.10% | 0.35% | 0.08% | 0.79% | 0.30% | 0.33% | 0.55% | |
| AUD | -0.16% | 0.03% | -0.24% | 0.50% | -0.30% | 0.17% | 0.19% | |
| NZD | -0.37% | -0.13% | -0.40% | 0.46% | -0.33% | -0.17% | 0.02% | |
| CHF | -0.41% | -0.16% | -0.42% | 0.38% | -0.55% | -0.19% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
