GBP/JPY is on the rise for the second day in a row, currently trading around 188.70 during the Asian trading hours on Tuesday. The Bank of England (BoE) policymaker Catherine Mann’s hawkish comments on Monday have provided support to the Pound Sterling (GBP).
In a podcast with the Financial Times (FT), Mann expressed concerns about UK wage growth, highlighting it as a significant inflationary issue. She noted that services inflation is still over 5% annually, making it difficult to achieve the 2% headline inflation target.
Investors are eagerly awaiting the release of the UK’s monthly employment data on Tuesday, with expectations for a decline in jobless benefits claims to 14.5K for July, down from the previous reading of 32.3K. Additionally, UK consumer inflation data, due on Wednesday, are expected to show mixed results.
However, the upside potential for risk-sensitive currencies like the British Pound may be limited by escalating geopolitical tensions in the Middle East. Safe-haven flows may be supporting the Japanese Yen (JPY), thereby curbing the upside of the GBP/JPY pair.
On the other hand, Japan’s parliament is scheduled to hold a special session on August 23 to discuss the Bank of Japan’s (BoJ) recent interest rate hike. The lower house financial affairs committee is expected to invite BoJ Governor Kazuo Ueda to attend the session, as reported by government sources.
Analysis and Explanation:
The GBP/JPY currency pair is experiencing a bullish trend, driven by positive comments from a Bank of England policymaker and expectations for favorable UK labor market data. However, geopolitical tensions and safe-haven demand for the Japanese Yen could limit the Pound’s upside potential. Investors should closely monitor the upcoming UK employment and inflation data releases, as well as the special session in Japan’s parliament regarding the BoJ’s interest rate hike. These events can impact currency movements and global financial markets, potentially affecting individual investment portfolios and trading strategies.