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- GBP/JPY cautiously rose for Wednesday, testing 181.00 region
GBP/JPY cautiously rose for Wednesday, testing 181.00 region
- GBP/JPY is floating higher, albeit cautiously, after an unconfirmed BoJ FX intervention on Tuesday.
- The Pound Sterling has struggled against the Yen lately, down 3% from recent highs.
- The BoJ has so far refused to confirm or deny operations to defend the JPY in open markets.
The GBP/JPY caught a mild lift in Wednesday trading, reaching an intraday peak of 181.26, extending the rebound from Tuesday's bottom of 178.08.
The Japanese Yen (JPY) rapidly appreciated on Tuesday, with the GBP/JPY plummeting around 300 pips within a matter of seconds, and it remains unconfirmed that the Bank of Japan (BoJ) intervened in FX markets to defend the Yen.
With the economic calendar devoid of any meaningful data for either the Pound Sterling (GBP) or the Yen, broader market sentiment is set to drive the pair around the charts heading through the back half of the trading week.
Thursday will bring Japanese Labor Cash Earnings, with the annualized figure for August last printing at 1.3%.
GBP/JPY technical outlook
Hourly candles have the Guppy trading flat for Wednesday, and the pair is up 0.33% or 60 pips for the day. Intraday action is largely trading back into a familiar range prior to the assumed BoJ intervention, and prices remain capped below the 200-hour Simple Moving Average (SMA) currently resting near 181.50.
Daily candlesticks have the GBP/JPY pinned into the 100-day SMA, with the 180.00 major psychological handle acting as a floor for technical momentum. The Guppy is up 14% for the year, trading over 2,200 pips above 2023's opening bids.
Bank of Japan FAQs
What is the Bank of Japan?
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
What has been the Bank of Japan’s policy?
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
How do Bank of Japan’s decisions influence the Japanese Yen?
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
Is the Bank of Japan’s ultra-loose policy likely to change soon?
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
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