GBP/JPY Hits Highest Levels Since 2016, Ignoring Mixed UK Growth

GBP/JPY maintains its bullish stance around the mid-175.00s, supported by concerns about the dovish stance of the Bank of Japan (BoJ) and selling pressure in Treasury bonds. The currency pair continues to hold onto moderate gains, reaching its highest levels since January 2016.

Despite mixed concerns about the UK's economic growth, sellers remain subdued due to BoJ officials defending their accommodative monetary policy. The bond markets reflect significant selling pressure ahead of the upcoming central bank decision.

The bearish Japan Producer Price Index (PPI) further strengthens the bullish bias, especially in anticipation of the UK employment data and the BoJ monetary policy meeting. GBP/JPY remains on an upward trajectory for the fourth consecutive day, as bulls push the currency pair to levels not seen since early 2016 during the European session on Monday. This upward momentum is justified by the market's acceptance of the diverging monetary policies between the Bank of England (BoE) and the Bank of Japan (BoJ). Additionally, the firmer bond yields and the upcoming significant data and events of the week contribute to the positive sentiment.

Concerns about the hawkish stance of the BoE are not substantiated by the latest comments from policymakers. Catherine Mann of the BoE emphasizes the need for a long-term agenda to support economic growth. Meanwhile, the Confederation of British Industry (CBI) trade body suggests that although the UK's economy is likely to avoid a recession this year, persistent issues like weak business investment remain. The higher inflation in the UK compared to Japan, along with these ongoing concerns, favor the GBP/JPY bulls, reinforcing the divergence between the two central banks.

On the other hand, Japan's PPI for May continues its downward trend for the fifth consecutive month, registering a year-on-year decline of 5.1% compared to the previous reading of 5.8% and market expectations of 5.5%. The monthly figures also disappoint Yen traders, showing a -0.7% month-on-month outcome, while expectations were at -0.2% and the previous figure was 0.2%. Following this weak inflation data, BoJ Deputy Governor Masazumi Wakatabe states that there will be no changes in the BoJ's monetary policy during this week's meeting.

Furthermore, Bloomberg reports heavy selling pressure in the Treasury bond market, favoring higher yields and GBP/JPY prices. Hedge funds continue to sell short-dated Treasuries, expecting the Federal Reserve's fight against inflation to persist.

However, recent bullish speculations supporting the BoJ's potential exit from ultra-easy monetary policy pose a challenge to GBP/JPY bulls. Reuters reports a decline in yields on Japanese Government Bonds (JGBs) as investors anticipate that the Bank of Japan will maintain its current stimulus settings during this week's meeting.

Looking ahead, Tuesday's UK employment data will be significant for observers of the currency pair, leading up to the BoJ meeting on Friday.

Trade closed: target reached:

Trade active:

The GBP/JPY is displaying a strong upward momentum, aligning with our earlier prediction. The price has surged significantly, indicating a potential continuation of the bullish trend. Furthermore, the second target we identified is rapidly approaching, suggesting that our forecast is on track.

The currency pair has experienced a substantial increase in value, with the GBP gaining strength against the JPY. This upward movement signifies a favorable market sentiment and a potential extension of the prevailing trend.

As the price continues to climb, the attainment of our second target appears imminent. This reinforces our initial analysis and enhances the credibility of our prediction.

Traders and investors should closely monitor the GBP/JPY as it progresses further. While there is always inherent market uncertainty, the current market conditions and the price movement suggest a promising outlook for the currency pair.

Comment:

✅ CLOSED