GBP/JPY holds mild losses near 191.50, awaits UK Retail Sales

• GBP/JPY edges lower as the economic growth in Japan raises bets of a further rate hike by the BoJ.
• The risk-sensitive GBP receives support from the improved risk sentiment following US Retail Sales.
• UK Retail Sales are expected to increase by 0.5% and 1.4% for MoM and YoY for July, respectively.

GBP/JPY breaks its four-day winning streak, trading around 191.60 during Friday’s Asian hours. The decline in the GBP/JPY cross can be attributed to the strengthened Japanese Yen (JPY), which has gained support from recent growth in Japan’s second-quarter GDP, increasing the likelihood of a near-term interest rate hike by the Bank of Japan (BoJ).

However, the JPY could experience volatility due to political uncertainty in Japan. Japanese Prime Minister Fumio Kishida announced at a press conference on Wednesday that he will not seek re-election as the leader of the Liberal Democratic Party (LDP) in September.

However, stronger-than-expected recovery in US Retail Sales has eased concerns about a potential US recession and improved risk-on sentiment. The improved risk-on mood could boost the risk-sensitive Pound Sterling (GBP) and limit the downside of the GBP/JPY cross.

Additionally, the British Pound is supported by positive key economic data from the United Kingdom (UK) released on Thursday, including GDP figures. The UK economy expanded by 0.6% quarter-on-quarter in the second quarter, in line with expectations. Year-on-year, GDP increased by 0.9% in Q2, matching expectations and up from the 0.3% recorded in Q1.

Traders are likely awaiting the release of the UK Retail Sales data scheduled for Friday, with expectations for a month-on-month rebound to a 0.5% increase in July, up from the previous decline of 1.2%. Additionally, annual growth is forecasted to rise by 1.4%, reversing the earlier decline of 0.2%.