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GBP/JPY fluctuates beneath 158.00 in advance of UK economic data
As the spotlight switches to US economic data, GBP/JPY is bouncing in a narrow range below 158.00. The Japanese Yen is supported by the BoJ's signal that it will end its ultra-expansionary monetary policy that has been in place for decades. Since the beginning of the last four months, production activities in the United Kingdom have steadily declined.
During the Asian session, the GBP/JPY pair is exhibiting erratic behavior below the critical resistance of 158.00. As investors await the publication of United Kingdom economic data for additional impetus, the cross is exhibiting a neutral picture.
On Thursday, market traders dropped GBP/JPY following an announcement by the Bank of Japan (BoJ) that the central bank will assess the consequences of a decade-long loose monetary policy strategy on economic growth and inflation.
After the central bank expanded the range of 10-year Japan Government Bonds, speculation regarding a change in the BoJ's stance towards the price index has increased (JGSs). The BOJ stated in a policy statement that the measure was designed to "enhance market functioning and facilitate a smoother development of the entire yield curve while preserving accommodating financial conditions."
In the meantime, International Monetary Fund (IMF) Managing Director Kristalina Georgieva communicated via Reuters early Friday morning in Asia that the BOJ should adopt a dovish stance. The pressure from labor on labor pay hikes has not resulted in a significant shift. In other words, there is no inflationary driver there.
An modification to the central bank's debt yield curve management regime was not prompted by inflation, which remains quite close to the bank's target of 2%.
On the front of the United Kingdom, investors are monitoring the publication of economic statistics. The consensus predicts that Industrial and Manufacturing Production (Nov) will decline between 3.0% and 4.8% annually. In the past four months, production activity in the United Kingdom have declined continuously. The policymakers at the Bank of England (BOE) will have less difficulties if a spate of slowing reduces inflationary expectations.
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