GBP/JPY drops post a loss in the upside momentum above 159.00, UK GDP eyed
- GBP/JPY has sensed selling pressure around 159.50 ahead of UK GDP data.
- The settlement of the UK GDP for the fourth quarter in a positive manner will confirm that the UK economy is not in a recession.
- Investors are awaiting the list of nominations for the successor of BoJ Governor Haruhiko Kuroda.
The GBP/JPY pair has dropped below 159.20 after demonstrating a loss in the upside momentum post printing a fresh three-day high at 159.50 in the early Asian session. The cross has corrected marginally as investors are getting anxious ahead of the release of the United Kingdom’s preliminary Gross Domestic Product (GDP) (Q4) data.
The odds of a recession in the UK economy in 2023 are extremely higher as the Bank of England (BoE) has already increased interest rates heavily and more rate hikes are in pipeline. Also, the cost of living pressures is critically expensive due to higher food prices. In addition to that, the UK government is not interested in providing monetary support to the economy as it is already busy containing the pile-up debt mess itself.
Therefore, the GDP data for the fourth quarter of CY2022 carries significant importance. In the past three quarters, the GDP numbers have contracted once and a finish of the fourth quarter in a positive manner will confirm that the UK economy is not in a recession for now.
Meanwhile, commentary from Bank of England (BoE) Governor Andrew Bailey on Thursday kept the Pound Sterling solid. BoE Bailey cited "We expect inflation to come down rapidly this year." He sees the labor market loosening and expects it to show up more in declining vacancies and hours, rather than in higher unemployment."
BoE Chief Economist Huw Pill testifying before the UK Treasury Select Committee cited "There is substantial further monetary policy tightening still to come through as a result of lags in policy transmission."
On the Japanese Yen front, investors are awaiting the list of nominations for the successor Bank of Japan (BoJ) Governor Haruhiko Kuroda. Analysts at Commerzbank believe “The nomination, which is expected to take place next week, is likely to upset the Yen exchange rates quite heavily, regardless of which candidate will emerge as the favorite.”