Gbpjpy Nosedives On Cautious Mood

last updated on

Gbpjpy Nosedives On Cautious Mood

Gbp/Jpy Nosedives To 199.50 On Cautious Mood

GBP/JPY is on the back foot for the 4th trading day in a row and is exchanging hands at 199.50 on Wednesday. The recent downside in the GBP/JPY is due to the risk-off flows that favour assets like the Japanese Yen (JPY).

An important event for the GBP/JPY is tomorrow's BoJ meeting, where the central bank is expected to raise the rates. That's one reason why we see the downside in GBP/JPY, as traders are offloading their short positions before the big event.

Japan'S Manufacturing Pmi Declines To 49.2

If we look at the fundamental data, Japan's PMI data showed a change from 50.00 in June to 49.2 in July 2024. This reading was lower than the 50.5 forecast made by the experts. But what's more worrying is that it also signals a contraction in the Japanese manufacturing sector.

This marks the first instance since April 2024 when the manufacturing PMI has dipped below 50 (neutral line). Meanwhile, the PMI of Japan's services inched higher from 49.4 to around 53.9 in July. This makes it the 6th consecutive increase in the services PMI and shows the resilience of the services sector.

If we look at the UK market, the center of attention is the Bank of England (BoE) and its decision regarding the rate cuts. There is a very slim chance that the BoE will cut the rates at the August meeting, which is actually good news for the GBP.

However, let's not forget the bigger picture - The BoE is expected to maintain the rates while the BoJ is expected to hike the rates. A scenario like this would mean more downsides for the GBP/JPY, as the Japanese yen will become an even more interesting asset.

Later today, the UK PMI data will be released which will also influence the GBP/JPY cross. According to market estimates, the services PMI of the UK will rebound along with the manufacturing PMI as well.

Trending Stories