In early Thursday trading in Asia, the GBP/JPY currency pair pulled back modestly. This brought it down from the more than two-week high it reached on Tuesday. The maximum of the cross peaked just above 203.55-203.60. Today it is under pressure chiefly from the increasing strength of the Japanese Yen (JPY) and market anticipation of forthcoming economic data from the UK.
On Wednesday, the GBP/JPY cross jumped to its highest level in more than two weeks. That didn’t last long as traders soon backpedaled on this move in response to comments from Bank of Japan Governor Kazuo Ueda. He observed that Japan’s underlying inflation is on a clear upward trend toward the 2% target. That overall trend has lured in a new breed of Japanese currency buyers. This sentiment helped to push the GBP/JPY cross sharply lower during Thursday’s trading hours.
Moreover, signals from Japanese Finance Minister Satsuki Katayama regarding yen policy stoked fears of a currency intervention, adding to the speculative fire on the market’s part. His warning about possible instability in currency markets has fostered a dramatic sense of uncertainty that has had the effect of further weakening the JPY, too. Because of that, these mixed signals are putting downward pressure on the GBP/JPY cross.
The UK situation further complicates matters, market experts point out, with the highly anticipated release of UK economic data. The UK is set to publish its Preliminary Q3 Gross Domestic Product (GDP) growth figures, a key indicator of economic activity. The Office for National Statistics publishes GDP data on a monthly and quarterly basis. This is the figure used to calculate UK gross domestic product (GDP), a broadly accepted measure of the total economic activity within the UK over a given period.
And as traders get ready for this tidal wave of data, worries over the UK’s fiscal health have started to surface. These concerns lean towards bearish sentiment for the British Pound (GBP), adding to the downside pressure on the GBP/JPY cross. Market participants are taking caution before tomorrow’s GDP release as well. In fact, they see it as one of the most important indicators of the health of the UK economy.