August 31, 2023 12:11 PM

GBP/JPY declines to a new daily low, approaching the 185.00 level

GBP/JPY declines to a new daily low, approaching the 185.00 level

On Thursday, the GBP/JPY cross drew some sellers near the 186.00 round-figure level and kept tumbling lower throughout the early European session. Prices have recently dropped to a new daily low in the 185.15–185.10 range, reversing some of the previous day's upward movement to nearly a one-week high.

The dismal US statistics made public on Wednesday were interpreted as a warning indication that the country's surprisingly resilient economy may be losing speed as a result of quickly rising interest rates. Concerns over a deeper global economic slowdown aren't much lessened by the mixed Chinese PMIs, which lead to some haven movements towards the Japanese Yen (JPY) and become a significant factor driving the GBP/JPY cross lower.

Recall that the BoJ is the only central bank in the world to continue to maintain negative interest rates and that it is anticipated that it will maintain its current position of ultra-easy monetary policy. In fact, a BoJ board member stated on Thursday that tightening monetary policy would be premature given that recent inflation hikes were primarily caused by rising import costs rather than wage increases. This comes after the BoJ Governor made dovish comments last week, noting that Japan's underlying inflation rate is still a little below the objective of 2%.

This assures that the status may be maintained by the Japanese central bank over the summer. In contrast, it is anticipated that the Bank of England (BoE) will keep up its cycle of tightening policy in order to tackle excessive inflation. Ben Broadbent, deputy governor of the BoE, reiterated the wagers when he said that because it was doubtful that the ripple effects of the price spike would dissipate quickly, policy rates could well have to stay in restrictive territory for a while. Huw Pill, the chief economist at the BoE, added that UK inflation is still "too high."