GBP

  • The BoE left interest rates unchanged as expected with no dovish language as they reaffirmed that they will keep rates high for sufficiently long to return to the 2% target.
  • Governor Bailey pushed back against rate cuts expectations as he said that they cannot say if interest rates have peaked.
  • The latest employment report missed forecasts with wage growth coming in much lower than expected and job losses in November.
  • The UK CPI today missed expectations across the board, which is another welcome development for the BoE.
  • The UK PMIs showed the Manufacturing sector falling further into contraction while the Services sector continues to expand.
  • The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
  • The market expects the BoE to start cutting rates in Q2 2024

JPY

  • The BoJ kept its monetary policy unchanged with interest rates at -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
  • Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases unless wage growth picks up.
  • The latest Japanese CPIshowed that inflationary pressures are easing although they remain well above the BoJ’s 2% target.
  • The latest Unemployment Rate remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI fell further into contraction but the Services PMI ticked higher remaining in expansion.
  • The latest Japanese wage data beat expectations and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
  • The market expects the BoJ to hike rates in Q2 2024.

GBPJPY Technical Analysis – Daily Timeframe

GBPJPY Technical Analysis
GBPJPY Daily

On the daily chart, we can see that GBPJPY pulled back to the resistance zone around the 184.00 handle where we had also the red 21 moving average for confluence. The sellers stepped in with a defined risk above the resistance to position for a drop into the 176.32 level and further added to the bearish bets following today’s miss in the UK CPI data.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see that we have an upward trendline around the 181.00 handle where the buyers might try to lean onto to fade the latest drop and position for a rally back into the 184.00 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 176.32 level.

GBPJPY Technical Analysis – 1 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 1 hour

On the 1 hour chart, we can see more closely the current price action with the pair approaching the trendline. This is where the battle between the buyers and sellers should get more interesting as a break to the downside should see the bearish momentum increasing and leading to a drop into the 176.32 level.

Upcoming Events

This week is a bit empty on the data front as we head into the Christmas holidays. Today, we have the US Consumer Confidence reports. Tomorrow, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Japanese CPI, the UK Retail Sales and the US PCE data.