- GBP/JPY discovers a temporary cushion near 194.00, while its outlook remains uncertain.
- UK 30-year gilt yields soared amid growing concerns over mounting debt and caution over Trump’s protectionist policies.
- The BoJ said that it is considering raising the inflation forecast due to the depreciating Yen.
The GBP/JPY pair finds temporary support near 194.00 in Friday’s North American session after a two-day sell-off amid weakness in the Pound Sterling (GBP) across the board. The British currency faces intense selling pressure as yields on United Kingdom (UK) 30-year gilts spiked above 5.4%, the highest since 1992.
Market participants dumped UK gilts as they are worried about the UK economic outlook. Concerns over UK growth prospects have mounted, partly due to my deepening uncertainty over likely tight United States (US) trade policies under the administration of President-elect Donald Trump and the piling nation’s debt.
Higher UK gilt yields have resulted in a sharp increase in the government’s borrowing costs, which could prompt the need for more tax collection and lower public spending by the finance ministry, given that the Chancellor of the Exchequer vowed to avoid tapping borrowings to incur day-to-day spending.
However, UK Treasury Minister Darren Jones clarified at the House of Commons on Thursday that the government's decision to only borrow for investment was "non-negotiable". Jones added that it is normal for the price of gilts to "vary" and assured that financial markets continue to function in an "orderly way".
Meanwhile, the Japanese Yen (JPY) preforms strongly on Friday as the Bank of Japan (BoJ) is still considering the interest rate decision for its January monetary policy review, Bloomberg reported. The agency further added that the BoJ mulls to upgrade core-core inflation views for FY2024 and FY2025 on depreciating Yen.
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