GBP/JPY trades sideways as BoE Bailey sees scope for lower rates

GBP/JPY trades sideways, consolidating recent gains after Tuesday’s dip to its weakest level since September 9.
Japan’s flash PMI showed manufacturing contracting further, while services activity held firm.
BoE Governor Bailey struck a dovish tone, signaling further rate cuts ahead and citing softer labor market conditions.

Vishal Chaturvedi FXStreet

The British Pound (GBP) trades sideways against the Japanese Yen (JPY) on Wednesday, with GBP/JPY modestly higher, rebounding after briefly slipping to its lowest level since September 9 on Tuesday. At the time of writing, the cross is hovering around 200.00, holding onto recent gains but struggling to extend the advance.

Bank of England (BoE) Governor Andrew Bailey struck a dovish note on Tuesday, limiting Sterling’s recovery. Speaking in the West Midlands, Bailey said that interest rates still have “some further journey downward,” but the pace of easing will depend on the trajectory of inflation, which the central bank expects to fall further next year. He acknowledged signs of softening in the labor market and noted that monetary policy remains restrictive at present.

On the Japanese side, the latest Jibun Bank flash Purchasing Managers Index (PMI) data offered mixed signals. The Manufacturing PMI slipped deeper into contraction at 48.4 in September, down from 49.7 in August and below the 50.2 forecast, highlighting persistent weakness in factory activity and export demand. However, the Services PMI held firm at 53, only slightly lower than 53.1 in August, keeping the composite index in expansion territory at 51.1.

According to Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, “Japan’s private sector business activity expanded at the slowest pace in four months in September, according to the flash PMI. Selling price inflation increased at a more pronounced pace, pointing to higher consumer price inflation in the coming months.” Pan added that the survey highlights a dilemma for the Bank of Japan (BoJ), with weakening growth momentum on one hand and rising price pressures on the other.

Looking ahead, attention will turn to upcoming central bank cues and key data releases. BoE policymaker Megan Greene is scheduled to speak later on Wednesday. In Japan, the BoJ’s Monetary Policy Meeting Minutes are due on Thursday, followed by Tokyo Consumer Price Index (CPI) figures on Friday.

Economic Indicator

BoJ Monetary Policy Meeting Minutes

The Bank of Japan publishes a study of economic movements in Japan after the actual meeting. These meetings are held to review economic developments inside and outside of Japan and indicate a sign of new fiscal policy. Any changes in this report tend to affect the JPY volatility. Generally speaking, if the BoJ minutes show a hawkish outlook, that is seen as positive (or bullish) for the JPY, while a dovish outlook is seen as negative (or bearish).

GBP/USD holds above 1.3350 with the 200-day SMA capping gains

The British Pound appreciates against the US Dollar on Tuesday to trim previous losses and return to the 1.3375 area, aiming to retest resistance at the key 200-day Simple Moving Average. This is a popular indicator, which lies a few pips below 1.3400 and has been capping Pound’s recovery over the last two weeks.

EUR/USD surrenders some gains, back to 1.1440

EUR/USD now gives away part of the earlier advance and recedes toward thre 1.1440 zone on Tuesday. The pair’s firm uptick comes in response to the marked sell-off in the US Dollar, which has intensified after US inflation figures disappointed expectations in June and investors has assessed Chair Warsh’s testimony.

Gold battles to recover the $4,100 mark

Gold reverses the recent weakness and reclaims the area beyond the key $4,000 mark per troy ounce on Tuesday. The precious metal’s recovery picks up pace and approaches the $4,100 region following the Greenback’s decline and comments from the Fed’s Warsh.

Crypto Today: Bitcoin, Ethereum, XRP extend sideways trading amid ETF outflows, US-Iran war escalation

Bitcoin hovers around $62,500 amid prevalent sideways trading. Meanwhile, major altcoins such as Ethereum and Ripple are holding above crucial support levels at $1,700 and $1.05, respectively, reflecting ongoing consolidation across the crypto sector.

Fed Chair Warsh reaffirms they will deliver price stability

While testifying on the Semiannual Monetary Policy Report before the US House Financial Services Committee, Fed Chairman Kevin Warsh reiterated that the Fed is making a commitment on price stability and the goal of 2% inflation.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.