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GBP/JPP has sharply dropped to near 180.50 as hopes of a tweak in BoJ’s YCC have strengthened.
Inflation in Japan is becoming more demand-driven after wage growth.
UK firms are avoiding their dependence on credit to avoid higher interest obligations.
The GBP/JPY pair has stretched its south-side run to near the critical support of 180.50 in the London session. The cross has faced immense selling pressure as investors are hoping a tweak in the Yield Curve Control (YCC) by the Bank of Japan (BoJ) in its monetary policy on July 28.
Inflation in Japan is becoming more demand-driven after Japan’s Monthly Labor Survey for May showed confirmation of quickening wage growth after enormous efforts from the BoJ by keeping the interest rate policy ultra-dovish. Earlier, higher import prices were majorly driving inflationary pressures.
The Pound Sterling is struggling to find traction against the Japanese Yen despite accelerating fears of more fat interest rate hikes from the Bank of England (BoE). UK Finance Minister Jeremy Hunt conveyed this week that Britain’s government and the BoE will do whatever is necessary to bring down inflation.
The employment report released on Tuesday showed that wage pressures are sticky but jobless claims rose as job offers have dropped sharply. UK firms are avoiding their dependence on credit to avoid higher interest obligations. Also, households are facing the burden of higher interest rates, which has impacted demand for the housing sector dramatically.
Meanwhile, directors at International Monetary Fund (IMF) have praised BoE policymakers for raising interest rates by half-a-percent to 5%. About the interest rate guidance, IMF believes that the UK central bank may have to keep interest rates high for an extended period if inflation pressures persist, as reported by Reuters.
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