GBP/JPY is on the rise, nearing 187.90 during the European session. With the Japanese market observing Mountain Day on Monday, trading has been thin. Investors are now eagerly awaiting the release of monthly UK employment data on Tuesday, followed by consumer inflation figures on Wednesday. These economic reports will provide valuable insights into the UK’s economic conditions, potentially impacting the Bank of England’s monetary policy outlook.
Bank of England (BoE) policymaker Catherine Mann recently expressed concerns about UK wage growth in a podcast with the Financial Times (FT). She emphasized that wage growth remains a crucial factor for inflation. Despite the main rate holding at the BoE’s 2% target in June, Mann continues to worry about potential upward pressures on inflation.
Although Japan’s monetary policy outlook suggests that Bank of Japan (BoJ) officials are prepared to raise rates further, they have adopted a more cautious stance due to last week’s heightened market volatility. This cautious approach could limit the upside potential for the GBP/JPY cross.
Furthermore, the GBP/JPY cross may face challenges from safe-haven flows amidst increased geopolitical tensions in the Middle East. Recent reports indicate escalating tensions, including Israel Defense Forces intercepting “projectiles” from Lebanon and Israeli airstrikes in Gaza resulting in fatalities.
Analysis
The GBP/JPY pair is experiencing upward movement, driven by anticipation of key economic data releases in the UK. Investors are closely monitoring these reports for insights into the country’s economic health and potential impacts on monetary policy. Concerns about UK wage growth and inflation pressures have been raised, influencing market sentiment.
Additionally, Japan’s monetary policy stance and geopolitical tensions in the Middle East are contributing factors to the currency pair’s performance. Traders should remain vigilant and stay informed about these developments to make informed investment decisions.