GBP/JPY rises to near 213.00 as Yen underperforms ahead of BoJ’s policy

GBP/JPY moves higher to near 213.10 amid weakness in the Japanese Yen.
The BoJ is expected to leave interest rates unchanged at 0.75% on Friday.
More-than-expected UK inflation increase is expected to diminish dovish BoE expectations.

Sagar Dua FXStreet

The GBP/JPY pair trades 0.22% higher to near 213.10 at the start of the European trading session on Thursday. The pair gains as the Japanese Yen (JPY) underperforms across the board ahead of the monetary policy announcement by the Bank of Japan (BoJ) on Friday.

Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.01%	-0.02%	0.24%	-0.06%	-0.62%	-0.23%	-0.09%
EUR	0.00%		-0.01%	0.24%	-0.05%	-0.61%	-0.22%	-0.08%
GBP	0.02%	0.01%		0.26%	-0.04%	-0.60%	-0.21%	-0.07%
JPY	-0.24%	-0.24%	-0.26%		-0.28%	-0.82%	-0.46%	-0.30%
CAD	0.06%	0.05%	0.04%	0.28%		-0.55%	-0.17%	-0.02%
AUD	0.62%	0.61%	0.60%	0.82%	0.55%		0.40%	0.54%
NZD	0.23%	0.22%	0.21%	0.46%	0.17%	-0.40%		0.14%
CHF	0.09%	0.08%	0.07%	0.30%	0.02%	-0.54%	-0.14%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Investors expect the BoJ to hold interest rates steady at 0.75%, and leave the door open for interest rate hikes this year. Market participants will also focus on the BoJ’s Q4 Outlook report to get fresh cues about the current state of the economy.

On the fiscal front, Japan’s Prime Minister (PM) Sanae Takaichi is prepared to dissolve the parliament’s lower house on January 23. Takaichi called an early snap election to get more seats, increasing her odds to pass fiscal budget for the year. Takaichi has also announced removing the consumption tax to boost household spending, a scenario that could prompt inflationary pressures.

Meanwhile, the Pound Sterling (GBP) trades with caution even as faster-than-projected growth in the United Kingdom (UK) inflation in December has raised concerns over expectations of interest rate cuts by the Bank of England (BoE) in the near term. The data showed on Wednesday that the UK headline Consumer Price Index (CPI) rose at an annualized pace of 3.4%, faster than 3.3% estimates and the November reading of 3.2%.

Going forward, investors will focus on the UK Retail Sales data for December and the preliminary S&P Global Purchasing Managers’ Index (PMI) data for January, scheduled for Friday.

(This story was corrected at 08:00 GMT to say in the first paragraph that the pair gains as the Japanese Yen (JPY) underperforms across the board ahead of the monetary policy announcement by the Bank of Japan (BoJ) on Friday, and not Thursday.)

Economic Indicator

BoJ Interest Rate Decision

The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

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Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

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