GBPJPY has been hit hard today, with a UK PMI survey bringing the services sector into contraction as manufacturing declined into a three-year low of 42.5. This marks a notable shift in the outlook for UK growth, with the entire economy now flashing red according to the composite PMI figure. For the pound, this undermines the tightening story that has underpinned its strength, with a weakening economy likely to weaken demand and inflation. It also puts pressure on the Bank of England to hold off on any further tightening, with the rate hikes finally appearing to have a tangible impact on economic activity.
On the Japanese side of the equation, this week has brought a surprise jump in the BoJ core CPI reading, which rose from 3% to 3.3%. This flew in the face of most other inflation metrics, which have been moving lower. The question for the yen is whether this represents a one-off or the beginning of a new inflationary phase.
GBPJPY has managed to break below the 184.56 support level, completing a double top formation in the process. With that in mind, it is worthwhile watching out for further near-term downside as markets attempt to work out whether the BoE are going to hold off, and whether Japanese inflation is going to move higher. Further downside looks likely over the near-term, with Fibonacci support coming into play around the 182.8 (61.8%) and 181.8 (76.4%) levels.
On the Japanese side of the equation, this week has brought a surprise jump in the BoJ core CPI reading, which rose from 3% to 3.3%. This flew in the face of most other inflation metrics, which have been moving lower. The question for the yen is whether this represents a one-off or the beginning of a new inflationary phase.
GBPJPY has managed to break below the 184.56 support level, completing a double top formation in the process. With that in mind, it is worthwhile watching out for further near-term downside as markets attempt to work out whether the BoE are going to hold off, and whether Japanese inflation is going to move higher. Further downside looks likely over the near-term, with Fibonacci support coming into play around the 182.8 (61.8%) and 181.8 (76.4%) levels.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.