GBP

  • The BoE left interest rates unchanged as expected at the last meeting 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 state 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 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 at the last meeting 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 missed expectations by a big margin and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
  • The Tokyo CPI, which is seen as leading indicator for National CPI, eased further but the Core-Core measure remains stuck at cycle highs.
  • 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 is now at a key resistance around the 184.45 level. This is where we can expect the sellers to step in with a defined risk above the level to position for a drop into the 178.00 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.

GBPJPY Technical Analysis – 4 hour Timeframe

GBPJPY Technical Analysis
GBPJPY 4 hour

On the 4 hour chart, we can see more clearly the range between the 178.00 support and the 184.45 resistance. The buyers will also need to be careful as we might get a fakeout, which could be confirmed if the price after the breakout falls and breaks below the most recent higher low around the 182.80 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 JPY losing ground since the miss in the wage data. It looks more and more likely that the sellers can count only on rate cuts from the BoE as the BoJ is unlikely to do much with lower inflation and low wage growth. We can see that we have also a minor trendline that is supporting the current uptrend. If we see a fakeout and the price breaks below the trendline, the sellers are likely to pile in again targeting a break below the 182.80 swing low.

Upcoming Events

Tomorrow we get the US CPI report and the US Jobless Claims figures, while on Friday we conclude the week with the UK GDP and the US PPI data.