The GBP/JPY currency pair is back baby! After falling to a one-and-a-half-week low, it has rebounded as the most recent UK jobs report came out. The duo suffered an extended retreat from the 209.00 level, its highest placement since August 2008. Consequently, it sank despite breaking this threshold, continuing its decline for four days in a row before bouncing back. The early Asian trading on Tuesday pushed GBP/JPY above the key 207.00 figure during the European session. This increase is indicative of a complex response to the job numbers.
Recent volatility in GBP/JPY has largely been driven by speculation surrounding upcoming monetary policy actions from the Bank of England (BoE). These central bank developments are tightly connected to one another. Traders are closely watching these changes as they can dramatically impact market mood and currency values.
Recent Trends in GBP/JPY
Today, the GBP/JPY currency pair has fallen for the last four days in a row. This decrease suggests a broader market correction following recent peak levels. Last week GBP/JPY passed 209.00, setting a high not exceeded in over fifteen years. As traders reconsidered their positioning, the pair ebbed lower. This bearish momentum eventually resulted in a decline to a one-and-a-half-week low ahead of UK employment data.
After jumping at the release of such positive numbers, GBP/JPY ran back up over 207.00 on Tuesday morning just after that good news jobs figure was announced. Investors are re-setting assumptions around the UK jobs market. Retroactively approving monetary policy This change would be a sea change for monetary policy, for the better.
Influence of UK Jobs Data
The release of the UK jobs data has been fundamental in guiding the recent directional moves of the GBP/JPY pair. The total amount of people receiving unemployment insurance rose by 20.1K in November, much higher than the forecast of 22.3K. Last month’s Claimant Count Change was revised significantly downward from 29.0K to -3.9K. This change was a modest boon for the British Pound, despite the Monday Wednesday uptick.
Generally speaking, an increase in jobless claims tends to be seen as bearish for the Pound Sterling, which would weigh on GBP/JPY. The net negative revision of prior claims helped relieve some worries. Consequently, GBP/JPY turned around sharply from multi-month lows.
Market participants are looking forward to the flash UK PMIs (Purchasing Managers’ Index) due out at the end of this week. They’re looking for important clues about the health of the UK economy and how that might affect GBP/JPY.
Impact of Central Bank Policies
There are additional central bank activities coming up that market participants are watching closely that could move GBP/JPY even further. The next key rate decision from the BoE on Thursday will likely set the tone for the British Pound. So any signal as to future BoE interest rate policy could have outsized effects upon market sentiment towards GBP and thus GBP/JPY.
The BoJ’s widely predicted first interest rate hike is fueling all this excitement. This latest development complicates the bearish currency pair’s movements even further. Ahead of that dubious honor, traders are awaiting the results of a two-day BoJ policy meeting this Friday. Their outlook is further strengthening the support for the Japanese Yen. What is most important for GBP/JPY moving forward is the interaction between these two central banks’ decisions.