The GBPJPY pair, representing the exchange rate between the British Pound and the Japanese Yen, is a pivotal gauge of economic interactions between the United Kingdom and Japan. The British Pound is influenced by domestic factors such as political stability, financial data, and decisions of the Bank of England, particularly in terms of interest rate changes. Conversely, the Japanese Yen is impacted by Japan’s economic policies, investor sentiment towards Asian markets, and its status as a ‘safe-haven’ currency. These dynamics make the GBPJPY pair particularly sensitive to shifts in monetary policy and economic outlooks in both nations.
Japan Interest Rate Decision, July 31, 05:00 (GMT+2)
The upcoming decision on Japan’s interest rates, forecasted to remain at 0.10%, is critical. If the rate is held as expected, it may stabilize the Yen, keeping the GBPJPY relatively unchanged if no new policies are introduced. However, should the Bank of Japan opt for a surprise cut below the forecast, aiming to stimulate the economy further, it could lead to a depreciation of the Yen against the Pound, thereby increasing the GBPJPY rate. Conversely, if the decision exceeds expectations with a rate increase, it would likely strengthen the Yen, decreasing the GBPJPY rate as investors flock to the newfound higher yields of the Yen.
In March 2024, the Bank of Japan was the last to abolish negative interest rates, causing GBPJPY to rise!
UK Interest Rate Decision, Aug 01, 13:00 (GMT+2)
The UK central bank is predicted to cut the interest rate from 5.25% to 5.0%. If such a cut occurs, it could lead to a weaker Pound Sterling due to lower yields on Pound-denominated assets, which could start the GBPJPY pair falling. Conversely, the Pound Sterling will likely strengthen if the Bank of England surprises the market by keeping rates unchanged or raising them. This strengthening could lead to GBPJPY appreciation, as higher rates will attract more investors to the Pound due to its higher yields than the Yen.
In the Daily timeframe, GBPJPY, after a long-term rise, broke the trend line and fell to critical support. Despite the trendline breakdown, RSI indicates a significant oversold condition. However, MACD shows further downside opportunities.
If the bears push the price below the 196.000 support, the downside target will be 191.500;
A rebound from support will bring GBPJPY back to resistance at 201.000;
