GBP/JPY rebounds from 162.00 ahead of UK Manufacturing data and BoJ policy

The GBP/JPY pair attempted a rebound to near 162.00 in the early Asian session. The cross is expected to display extremely volatile moves ahead as investors are awaiting the release of the United Kingdom’s monthly Gross Domestic Product (GDP) and Manufacturing sector data, and the interest rate decision by the Bank of Japan (BoJ).

Mounting expectations of the coming pause in the policy-tightening spell by the Bank of England (BoE) is impacting the Pound Sterling. BoE policymaker Swati Dhingra warned against further interest rate increases by citing “Overtightening poses a more material risk at this point.” She further added, “Many tightening effects are yet to fully take hold.”

In times when the UK headline Consumer Price Index (CPI) is still in double-digit figure despite pushing rates to 4%, a steady policy stance could dampen the efforts yet made by BoE Governor Andrew Bailey and his teammates.

On the economic front, Monthly Manufacturing production (Jan) is expected to contract by 0.1% and the Industrial Production is seen contracting by 0.2% in the same period. The consensus shows monthly GDP has expanded by 0.1% vs. December’s contraction of 0.5%.

Meanwhile, the Japanese Yen is likely to display a power-pack action as March’s monetary policy will be the last for BoJ Governor Haruhiko Kuroda. Analysts at Danske Bank are of the view that “The BoJ will tweak its yield curve control in the short-term. It is not likely to happen this week, but we also were surprised the last time they did it in December. Either way, we think it is a matter of time and could happen during Q2.”