British Pound Forecast: GBP/JPY Edging Higher, GBP/USD Eyes BoE’s Bailey

GBP/USD, GBP/JPY Analysis and Talking Points

• GBP/JPY Drifting Higher Into Month-End
• GBP/USD Testing Support Ahead of BoE’s Bailey

A relatively subdued session in the FX space in which major USD pairs trade in tight ranges, with the exception of the Japanese Yen. As stocks hold onto recent gains, while both commodities and yields track higher, naturally the Yen will underperform in such an environment. At the same time, I suspect that month/quarter/half-year end is also playing its part in weighing on the low yielding currency, given that the Nikkei 225 is the relative outperformer this month vs its counterparts (Figure 1).In turn, cross-JPY may remain bid into month-end with EUR/JPY approaching 144.25-30 and GBP/JPY with scope to 168.00. (Previous note on GBP/JPY and month-end)

Figure 1. Index Performance MTD

Source: Refinitv, DailyFX

GBP/USD: Focus for GBP crosses will be on upcoming BoE speeches, most notably Governor Bailey’s comments scheduled tomorrow on the current policy issues the Bank of England faces. A reminder that at the most recent poliy meeting, the BoE slightly toughened their forward guidance with regard to rate hikes, prompting markets to boost expectations of a 50bps rate rise. For me, I am still doubtful about a 50bps hike and remain geared towards a 25bps hike given the continued weakness seen in activity data, which has become a growing concern for the BoE.

Source: ECB

GBP Levels to Watch

With the USD picking up, Cable finds itself testing support at 1.2240-50, below which opens the door towards a move to 1.2260-85. Meanwhile, topside resistance is situated at 1.2315-30.

A Helpful Guide to Support and Resistance Trading

Source: Refinitiv