GBP/JPY falls to near 185.00 following the remarks from BoJ’s Nagakawa, UK economic data

• GBP/JPY depreciates due to hawkish sentiment surrounding the BoJ’s policy stance.
• BoJ’s Nagakawa said that the central bank may reconsider its tapering plan.
• UK GDP showed zero growth in July, reinforcing the odds of a BoE 25 basis points rate cut in November.

GBP/JPY extends its downside for the second successive day, trading around 185.00 during the European session on Wednesday. The Japanese Yen (JPY) gains ground following the remarks from Bank of Japan (BoJ) board member Junko Nagakawa.

BoJ board member Nagakawa stated that the central bank may adjust the extent of its monetary easing if the economy and prices align with its projections. Despite the rate hike in July, real interest rates remain deeply negative, and accommodative monetary conditions persist. Should long-term rates surge, the BoJ may reconsider its tapering plan during its policy meetings, as necessary.

In the United Kingdom (UK), the UK GDP showed no growth in July, following a stagnation in June, according to the latest data released by the Office for National Statistics (ONS) on Wednesday. This fell short of the market forecast, which anticipated 0.2% growth for the month. Meanwhile, the Index of Services for July posted a 0.6% increase on a three-month rolling basis, down from June’s 0.8% figure.

No growth in the economy reinforces expectations of a possible quarter-point rate cut by the Bank of England (BoE) in November. Some traders are also pricing in the possibility of an additional rate cut in December.

Additionally, the UK Total Trade Balance showed that the deficit widened to £7.514 billion in July, up from £5.324 billion in June, marking the largest trade gap since April. Imports fell to a four-month low of £77.12 billion, while Exports dropped to a 25-month low of £69.60 billion.