The Bank of Japan (BOJ) has been hinting at a potential rate hike in December for some time now but has struggled to strengthen the yen.
However, during Governor Ueda’s speech on November 29, he highlighted that improving economic conditions might support an imminent policy shift. Markets are currently pricing in a 60% probability of a December rate hike, which gave the yen some much-needed upward momentum following the announcement.
Ueda also added that the BoJ is worried over the outlook for US economic policy, with Donald Trump taking office next month. Ueda reiterated that the central bank is concerned about the weakness in the Yen and will intervene in the FX market if needed.
Inflation, a key driver for BOJ policy, remains above the 2% year-over-year target, showing no signs of a sustained pullback which is a factor likely to weigh heavily on the central bank’s decision.
Pound Sterling’s Uncertainty Amid Mixed Economic Signals
Meanwhile, the Pound Sterling faces its own set of challenges, with market expectations hinging on the Bank of England’s (BoE) December interest rate decision. Despite some optimism, gains for the pound may be fleeting due to the UK’s mixed economic data, which could leave the BoE uncertain about making any firm policy changes.
Market sentiment remains cautious, with traders and investors keeping a close eye on economic indicators from both the UK and Japan. The interplay of monetary policy decisions and data releases from these two major economies will likely shape the GBP/JPY exchange rate in the coming weeks.
Technical Analysis
Source: TradingView
GBPJPY has been trending downwards since it went below the pivot line and below all EMAs, placing bearish pressure on the price.
Price is trading around its support at 189.1 with long bearish wicks forming, making traders question whether a drop below support is on the way. If the pair’s price does move below this support, the next major support level of 187.3 could come into play.
In a scenario where prices try to reverse upwards, the pair would need to recapture ground above the 190 zone and make its way back towards the pivot point at 191.9.
