The GBP/JPY exchange rate hinted at possible bearishness ahead of the Bank of Japan rate decision and UK retail sales data.
GBPJPY – Daily Chart
A potentially bearish candle was set in the GBP/JPY ahead of Friday, with the previous resistance at 196.00 being the key target.
UK retail sales data is released at 2 pm HKT on Friday, with analysts expecting a month-on-month dip to 0.4% from 0.6% in July. The potential for surprise upside is limited due to recent inflation, particularly in food prices.
At 2:30 pm, the Bank of Japan will have a press conference following their interest rate meeting, and that could be a driver that supports the Japanese yen at the pivotal 200 level.
The BOJ may raise its benchmark interest rate in October even if Sanae Takaichi, a fan of aggressive monetary easing policy, wins the Prime Ministerial leadership race, former central bank official Tomoyuki Shimoda said. One of the leading candidates for the October 4 vote, Takaichi has been a vocal critic of the BOJ’s rate hikes and has called for a spending push to boost the economy.
“While she could advocate bigger fiscal spending, I doubt Takaichi can pursue policies that could weaken the yen,” Shimoda said.
A weaker yen can support exports, but also increases import costs, and policymakers will want to continue with a stable path after the tariff meltdown earlier this year.
The BOJ will likely raise rates at its Oct 29-30 meeting if stock prices stay firm and its “tankan” business sentiment survey, due on Oct 1, does not worsen much, Shimodo added.
The yen may be able to gain some ground on the British pound on Friday, and a hawkish PM appointment could add to support for the yen in October.
