GBP/JPY is on a four-day losing streak, hovering around 199.50 during the Asian session as risk aversion drives the Japanese Yen higher. Traders anticipate the Bank of Japan (BoJ) to increase interest rates at their upcoming meeting, leading to short-sellers exiting positions and supporting the JPY.
A senior official in Japan’s ruling party has called on the BoJ to communicate its plan for normalizing monetary policy through gradual rate hikes, signaling a shift towards a growth-driven economy. Meanwhile, Japan’s Manufacturing PMI declined unexpectedly to 49.2 in July, while the Services PMI surged to 53.9.
In the UK, the reduced likelihood of an August rate cut by the Bank of England (BoE) is expected to bolster the Pound Sterling (GBP) and help limit losses in GBP/JPY. Traders are awaiting the release of the UK PMI activity survey results, with forecasts predicting an increase in both the Services and Manufacturing PMI figures.
Analysis:
The ongoing decline in GBP/JPY can be attributed to increased risk aversion and expectations of a rate hike by the BoJ. Positive economic data in Japan, coupled with the potential for a more hawkish monetary policy stance, has bolstered the Japanese Yen against the Pound Sterling.
On the other hand, the UK’s stable monetary policy outlook and anticipated improvement in PMI figures could support the GBP and help offset some of the losses in the GBP/JPY pair. Traders should closely monitor central bank decisions and economic indicators to make informed investment decisions in the forex market.