GBP/JPY is consolidating in a range on Tuesday with mixed fundamental cues. It struggles to find a firm intraday direction and moves within a narrow trading band, staying below the 197.00 round-figure mark during the first half of the European session on Tuesday. Caution is needed when thinking about its near-term path due to the mixed fundamental backdrop and thin trading volumes on Christmas Eve.
Impact of BoJ’s Rate Hike Uncertainty on JPY
The Japanese Yen (JPY) is performing relatively poorly because of the uncertainty about when the Bank of Japan (BoJ) will raise interest rates again. The BoJ gave few hints at the end of its December policy meeting on how soon borrowing costs might go up. Also, BoJ Governor Kazuo Ueda last week said the central bank might wait longer for the next hike and needs more info on wage trends. Along with a generally positive risk tone, this is weakening the JPY and helping the GBP/JPY cross.
Data and Intervention Speculations Affecting JPY
Data from last Friday showed Japan’s core inflation sped up in November, which leaves the possibility of a BoJ rate hike in January or March. There are also speculations that Japanese authorities might step in to support the domestic currency. Japan’s Finance Minister Katsunobu Kato warned against big foreign exchange moves and said on Tuesday that the government is ready to act to stabilize the currency. Besides, persistent geopolitical risks and trade war fears also support the safe-haven JPY.
BoE’s Stance Impacting GBP
The British Pound (GBP) is being held back by the Bank of England’s (BoE) split vote decision to keep interest rates unchanged last week and its dovish outlook. Three members of the BoE’s MPC voted to cut rates. Also, policymakers lowered their economic forecast for the fourth quarter of 2024. This could limit the upward movement of the GBP/JPY cross. So, it’s wise to wait for the pair to show sustained strength and move above the 197.00 mark before expecting an extension of its monthly uptrend that started from near the 188.00 round-figure mark.
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