- GBP/JPY drifts lower for the second straight day, albeit lacks any follow-through selling.
- Expectations that the BoE will start cutting rates in 2024 continue to undermine the GBP.
- Traders look forward to the UK monthly Retail Sales figures for short-term opportunities.
The GBP/JPY cross remains under some selling pressure for the second straight day on Friday and moves further away from its highest level since November 2015, around the 188.25-188.30 area touched earlier this week. Spot prices currently trade near the 186.85-186.80 region, down just over 0.10% for the day, as traders now look to the UK Retail Sales figures for a fresh impetus.
In the meantime, softer UK consumer inflation figures released on Wednesday reaffirmed market expectations that the Bank of England (BoE) will soon start cutting rates. This is seen as a key factor behind the British Pound's relative underperformance and exerting some pressure on the GBP/JPY cross. Apart from this, a softer risk tone drives some haven flows towards the Japanese Yen (JPY) and contributes to the mildly offered tone.
That said, any meaningful appreciating move for the JPY still seems elusive in the wake of a more dovish stance adopted by the Bank of Japan (BoJ). In fact, BoJ Governor Kazuo Ueda reiterated this Friday that the central bank will patiently maintain the ultra-loose monetary policy settings as sustained achievement of the inflation target is not yet in sight. Ueda added that the trend inflation is likely to accelerate toward 2% through fiscal 2025.
This might continue to undermine the JPY and help limit the downside for the GBP/JPY cross. Meanwhile, Japan's Deputy Finance Minister Ryosei Akazawa reiterated that the government will intervene in the FX market to arrest excess volatility. This might hold back traders from placing aggressive bullish bets and cap the upside for spot prices. Nevertheless, the cross remains on track to register gains for the third successive week.
Technical levels to watch
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