GBP/JPY Recovers Above 160.0 In Advance Of BoJ Ueda's Speech

During the Asian session, the GBP/JPY pair has extended its recovery above 160.00. The cross has strengthened following the publication of better-than-expected United Kingdom Retail Sales data. Monthly Retail Sales (Feb) data increased by 1.2%, exceeding both the consensus estimate of 0.2% and the previous release of 0.9%. The annual Retail Sales data for the United Kingdom decreased by 3.5%, while analysts had predicted a contraction of 4.0%.

An increase in the Producer Price Index (PPI), which could increase the financial burden on households, could be prompted by a rise in consumer spending in the United Kingdom. In contrast, Bank of England (BoE) Governor Andrew Bailey stated in an interview with BBC on Friday, "There is evidence of encouraging progress on inflation, but we must remain vigilant."

Despite global banking turmoil, the BoE raised interest rates by 25 basis points (bps) to 4.25 percent last week. In the UK zone, inflationary pressures are extremely elevated due to higher food price inflation and a labor shortage. The inflation rate is still in double digits, so the BoE had no choice but to increase interest rates further.

Catherine Mann, a member of the Bank of Canada, stated on Friday that she voted for a 25bp rate hike at this week's meeting instead of a larger increase, in part because inflation expectations have begun to moderate, indicating that monetary policy is having an effect.

On the Tokyo front, the Japanese Yen will remain active prior to Bank of Japan (BoJ) Governor Kazuo Ueda's speech. As the central bank works to maintain an inflation rate above 2%, a dovish posture from the BoJ is anticipated. The preponderance of the increase in Japan's inflation is attributable to higher import prices. Therefore, monetary instruments must exert a greater drive for inflation.