- The Japanese Yen loses steam after seeing significant gains up to the first week of February. The Yen struggles after weaker economic data.
- According to analysts, the decline in demand for the Yen is due to a more hawkish Fed than previously expected.
- Demand for the Pound declines regardless of strong price movement against the Yen. Economists look to the week ahead where the UK will release multiple vital economic data.
- The GBPJPY reaches its previous significant resistance level and edges closer to older resistance levels from 2015.
GBPJPY – February 12th-16th will be a Busy Week for the Pound. Will the BOE Become More Dovish?
The GBPJPY exchange rate has been rising for 3 consecutive days and with stronger volatility which indicates momentum. However, analysts are also taking note the GBPJPY is close to resistance levels from January 19th and November 2023. Investors are questioning whether the asset can maintain momentum at such a high price. On larger timeframes, such as the 2-Hour and 4-Hour, the GBPJPY is not obtaining serious signals indicating a decline. However, on the 5-minute chart, short-term signals indicate a reverting price condition or even a retracement. If a retracement does form, the Fibonacci levels indicate the price can decline to 187.118.
Analysts do not expect any significant economic data to affect the Pound over the next 24 hours. However, the UK will hold at least 5 significant events and releases which will strongly influence the Pound. These events include the Bank of England’s Governor Speech as well as economic data such as the UK inflation rate, unemployment claims change, GDP, and Retail Sales. Investors should also recall that the Bank of England’s Policy Committee for the first time in 4 years saw a member vote for a rate cut. If the above data signal further weakness in the UK economy, investors will further speculate a dovish central bank. As a result, the Pound can witness serious declines.
GBPJPY – Economists Continue to Predict a Hawkish BOJ in 2024!
Due to a lack of major economic releases in the week ahead, the Yen is being driven by external factors. According to forecasts of further actions of the Bank of Japan from Pacific Investment Management Company, one of the largest capital management companies, the regulator may tighten monetary policy as early as March or April, as well as adjust borrowing costs several times this year. According to the report accelerating wage growth may lead to a sustained increase in inflation. This can provide the Bank of Japan the leeway to follow a more traditional monetary policy path and strengthen the Yen.
Though on the other hand, according to other fundamental analysts, the Bank of Japan will never opt for a more restrictive stance while inflation is declining. Over the past two months, inflation has fallen from 3.3% to 2.6%. For the Bank of Japan to move away from negative rates, inflation will need to stabilize in the longer term above 2.5% or at least increase over the next two months. If the Bank of Japan does hike, it may be the only central bank to hike in 2024. This factor can significantly support the Yen in the medium to longer term.
Michalis Efthymiou
Market Analyst
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