- GBP under stress on subdued UK job data.
- The yen is also under pressure after Japan termed recent strength in Yen as “one-sided”.
GBP/JPY is now trading around 150.11, in the New York Session, edging down by 0.10% on a subdued UK job report published on Wednesday coupled with ongoing Brexit squabbling.
The market is not concerned about absolute numbers of UK unemployment, but it’s concerned about the wage growth. Although wage growth for Dec’17 came above estimate at 2.5%, it’s still way below the UK inflation rate of 3%; in essence, real wage growth is still negative and that is not good for consumer spending or private consumption.
Moreover, the downward wages' growth revision for previous period to 2.3% from 2.4% may be negative for the GBP along with an uptick in headline unemployment rate, which is the first rise for almost two years. The uptick in headline unemployment figure came primarily out of a surge in unemployment from the younger generation (18-24 years), which is a cause of concern.
Overall, this job report may be also an indication of the adverse effect of a stronger currency on Britain’s export-oriented economy and thus may force the BOE to stay on the sideline in March as UK CPI at 3% is also well above BOE´s tolerance level. The market may be now looking into May for any BOE rate hike amid dilemma of imported inflation and economic growth; consequently, GBP slumped.
Although the BOE/MPC testimony is not over yet, so far it seems that the MPC is quite optimistic about UK economic prospect and wages´ growth despite significant worries about Brexit. GBP caught a bid when Carney downplayed the currency devaluation narrative and said that “we are probably at the peak point of impact of weaker sterling on inflation, but some impact will last for years longer and currency depreciation is not a good economic strategy and it makes a country poorer”.
In the ongoing Brexit saga, the UK Official said they are in a broad alignment with the EU on the transition period. Meanwhile, UK PM Theresa May is facing pressure after 62 Tory hardliners demand clean Brexit, with lawmakers challenging May to take a harder approach on how far UK rules should move away from the EU after Brexit and the nature of the transition period.
The Yen, on the other side, lost some strength earlier on Wednesday Asian session on renewed Japanese concerns about Yen´s strength after Japan’s top FX diplomat, Asakawa said that “Yen's recent moves have been one-sided”. Also, Yen was under stress on muted Japanese Manufacturing PMI data.
Technically, as par chart pattern, GBPJPY has now supports at 149.95 and the 148.75-147.95 area and for any strength, it has to sustain above the 151.25 price zone for 152.25 and the153.25-154.70/156.50 price zones in the coming days.
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