GBP/JPY pumps the brakes, extends into a two day backslide

GBP/JPY explored the downside on Thursday as GBP faith withers.
The Pound Sterling lost market support after UK growth figures missed the mark.
UK Retail Sales are due on Friday, lofty forecasts might set Guppy up for failure.

Joshua Gibson FXStreet

GBP/JPY pivoted back into the low end on Thursday, extending into a second day of losses after UK economic growth and activity figures pummeled the Pound Sterling, and GBP traders will be shuffling their feet ahead of Friday’s UK Retail Sales figures for December.

UK Gross Domestic Product (GDP) growth rebounded in November, but missed median market forecasts to print at a thin 0.1% MoM, down from the expected 0.2% and climbing only moderately from the previous -0.1% contraction. UK Industrial Production barely moved the needle in November, contracting by -0.4% and entirely missing the forecast upswing to 0.1% compared to the previous month’s -0.6% backslide.

UK Retail Sales figures for December are due early during Friday’s London market session, and are expected to rebound to 0.4% from November’s 0.2% figure. On an annualized basis, Retail Sales are forecast to rally to 4.2% from the previous 0.5%, a lofty median target to set for an economic zone that has routinely missed market expectations in recent months.

GBP/JPY price forecast

The Guppy has been trapped in a back-and-forth pattern on the charts as monthly closes trade blows across the bulls and the bears. GBP/JPY is poised for a third straight week of firm declines, and the pair is set to get hung up on familiar technical support zones conglomerating around the 190.00 major price handle.

GBP/JPY daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

GBP/USD hovers around daily lows near 1.3450

GBP/USD trades with decent losses on Thursday, revisiting the 1.3450 zone. Cable’s resumption of the selling interest comes after two daily advances in a row and follows the improved sentiment around the Greenback amid fresh concerns in the Middle East.

EUR/USD bounces off lows, back to 1.1520

EUR/USD now manages to gather some traction following an earlier pullback toward the vicinity of 1.1500 on Thursday. The pair’s decent retracement comes in response to the firmer tone in the US Dollar in a context of reignited concerns over the Strait of Hormuz.

How Wall Street rigs the game [Video]

In this week’s Live from the Vault, Andrew Maguire is joined by Peter Antico and Sean Stone to discuss the Paradigm of Money - an in-depth expose of financial market corruption, from naked shorting to the two-tier system that protects Wall Street.

XRP Price Forecast: Sell-off persists, bears aim for $1.00 as Ripple eyes on-chain multi-signature upgrade

Ripple (XRP) remains pressured, trading below $1.05 at the time of writing on Thursday. The token has declined for the fourth consecutive day this week, reflecting lethargic sentiment in the broader cryptocurrency market despite the possibility of easing geopolitical tensions in the Middle East.

The Fed is doing the exact opposite of what it should be doing

About the Yen: The WSJ has a front-page story about how the Fed is doing the exact opposite of what it should be doing—lending dollars to Japan to buy yen. “Put simply: America is printing dollars so Japan can buy yen.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.