- GBP/JPY is expected to extend their gains above 163.50 on higher UK inflation expectations.
- The UK economic data comprising GDP, Industrial Production, and others are likely to remain downbeat.
- Japan’s Overall Household Spending improved to 3.5% vs. -0.5% and the expectations of 1.5%.
The GBP/JPY pair has given an upside break of the consolidation formed in a narrow range of 162.80-163.20 in the Asian session. The cross has turned positive as investors have ignored the soaring inflation expectations guided by the Bank of England (BOE) in its monetary policy meeting last week.
BOE Governor Andrew Bailey warned the investing community that the inflation rate could reach 13% due to volatile oil and food prices. The runaway inflation is now turning into a galloping one and the BOE is carrying less potential for tightening its policy aggressively. The BOE announced a 50 basis point (bps) interest rate hike and has elevated the rates to 1.75%.
Thanks to the subdued economic data and the ongoing political instability after the resignation of UK PM Boris Johnson, which have created a bummer situation for the BOE. In case of the occurrence of an inflation rate near 13%, a situation of recession in the UK economy is highly likely.
Going forward, the UK Gross Domestic Product GDP) data will be of utmost importance. As per the market consensus, the economic data is expected to shift downward to 2.8% from the prior release of 8.7 on an annual basis for the second quarter of CY2022. Also, the other economic data are expected to display an underperformance.
On the Tokyo front, the Overall Household Spending has improved dramatically to 3.5% from the prior release of -0.5% and the expectations of 1.5%. This may support the yen bulls as the economic data is an inflation indicator. A decent improvement in the economic data advocates that the inflation rate may accelerate further. However, the data could be driven majorly by soaring energy bills. Still, to keep the inflation rate above 2%, an increase in Labor Cost Index is imminent.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price holds strength ahead of US core PCE inflation
Gold price holds onto gains near $2,200 in Thursday’s European session. The precious metal exhibits firm footing ahead of the United States core PCE Price Index data for February, which will be published on Friday.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.